8061  '12  m  IVd 

"A  'M  'asnorjig 

SJ331EKI 

•soig  pjojiBO 
japu.ig 

junoa)oiou--j 


TVimammmmmmM 


National 
Muaicipal 

Review 

Vol.  XI,  No.  4  April,  1922  Total  No.  70 


Pensions  in  Public  Employment 

Report  of  the  Committee  on  Pensions 

Prepared  by  Paul  Studensky 
New  Jersey  Bureau  of  State  Research 

CONTENTS 

I.  Main  Defects  of  Existing  Systems   97 

II.  Preliminaries  of  a  Sound  System 101 

III.  Financial  Structure 1Q3 

IV.  Benefits 108 

V.  Establishment,  Administration  and  Membership 112 

VI.    Treatment  of  Unsound  Systems II4, 

VII.     Sound  Systems  in  Operation  :  Massachusetts,  New  Jersey,  New 

York,  New  York  City,  Milwaukee,  Chicago,  San  Francisco  115 
VIII.     Sound  Pension  Bills  About  to  Become  Laws:  Boston,  Munic- 
ipalities and  Counties  of  New  York,  Providence Kl 

Appendix — Actuarial  Tables 123 

Brief  Bibliography 124 


published  monthly  by  the 


NATIONAL  MUNICIPAL  LEAGUE 

\\  RUMFORD  BUILDING,  CONCORD,  N.  H. 

EDITORIAL  OFFICE,  261  BROADWAY,  NEW  YORK,  N.  Y. 


as  second-class  matter  April  15,  1914,  at  the  post-office  at  Concord,  New  Hampshire,  under  the  Act  of  August  24    1912 
ance  for  mailing  at  special  rate  of  postage  provided  for  in  Section  1103.  Act  of  October  1    niithnr;»./i  r»— _i „/  ,„-«' 


FOREWORD 


The  movement  which  involves  the 
estabUshment  of  provisions  for  the 
retirement  of  aged  and  disabled 
employes  and  for  the  dependents  of  the 
diseased  which  is  generally  referred  to 
as  the  pension  movement,  has  assumed 
in  the  public  service  of  this  country 
very  wide  proportions.  No  statistics 
are  available  as  to  the  number  of 
employes  covered  by  pension  provisions 
and  the  total  amount  of  obligations 
which  have  been  assumed  towards 
them.  A  fair  estimate  would  place 
the  number  at  more  than  eight  hun- 
dred thousand  and  the  total  obligations 
on  their  account  at  a  billion  and  a 
quarter  dollars.  The  teachers  covered 
by  pension  provisions  alone  exceed 
300,000  and  the  obligations  on  their 
account  half  a  billion  dollars.  The  fed- 
eral employes  also  number  more  than 
300,000  and  the  obUgations  on  their 
account  are  estimated  at  about  $440,- 
000,000.  To  these  must  be  added  other 
state  and  municipal  employes  and  the 
obligations  involved  in  their  cases. 

A  sound  and  orderly  development 
of  so  huge  a  movement  is  imperative 
if  disastrous  burdens  and  heavy  dis- 
appointments to  both  public  and  the 
employes  are  to  be  avoided.  This 
thought  seems  to  be  slowly  dawning 
upon  legislators,  administrators,  far- 
sighted  employes  and  public-spirited 
citizens  as  shown  by  the  fact  that  there 
has  been  a  remarkable  endeavor  made 
by  these  men  in  various  states  and 
cities  during  recent  years  to  place  their 
particular  local  pension  systems  or 
projects  on  a  sound  foundation. 

A  number  of  state  and  municipal 
commissions,  specially  appointed  for 
the  purpose  and  provided  with  proper 
technical  assistance,  have  made 
thorough  studies  of  the  existing  pension 
laws,  pointed  out  their  defects,  ad- 
vanced certain  principles  to  which  all 
pension  systems  should  conform  to  be 
sound,  suggested  the  ways  in  which 


the  transition  from  the  present  un- 
sound situation  to  a  sound  one  could 
be  effected  and  furthermore  secured  the 
enactment  of  some,  if  not  all,  of  their 
curative  recommendations. 

These  various  investigations  were 
limited  in  their  scope  to  their  particu- 
lar state  or  city  and  to  this  extent  had 
only  a  limited  influence,  and  their 
valuable  suggestions  and  achievements 
have  never  been  collated  and  digested 
except  in  the  field  of  teachers'  pensions. 

In  order  to  fill  this  gap,  the  National 
Municipal  League  has  created  a 
special  committee  and  has  called  upon 
the  New  Jersey  Bureau  of  State  Re- 
search for  technical  assistance.  It  was 
decided  to  bring  together  the  accumu- 
lated results  of  these  investigations,  to 
set  forth  the  defects  of  those  pension 
systems  which  are  apparently  breaking 
down,  to  formulate  the  fimdamental 
principles  which  should  govern  the 
pension  laws  of  any  state  and  to  pre- 
sent all  this  in  a  compact  report. 

The  report  submitted  herewith  was 
prepared  by  the  secretary  of  the  com- 
mittee, Dr.  Paul  Studensky,  Director 
of  the  Bureau  of  State  Research,  in 
accordance  with  the  general  delibera- 
tions of  the  committee. 

Mr.  De  Roode  dissents  from  approval 
of  the  contributory  principle  in  his  mi- 
nority report  which  will  appear  in  the 
May  issue  for  lack  of  space  here. 

MEMBERS   OF    COMMITTEE 

Arthur  N.  Pierson,  Chairman 
George  B.  Buck,  Actuary 

H.   W.    DODDS 

E.  O.  Griffenhagen 
Darwin  R.  James,  Jr. 
Lawson  Purdy 
William  Gorham  Rice 
Albert  de  Roode 
Don  C.  Sowers 
Clinton  Rogers  Woodruff 
Paul  Studensky,  Secretary 


' 


NATIONAL 
MUNICIPAL  REVIEW 


Vol.  XI,  No.  4 


APRIL,  1922 


Total  No.  70 


PENSIONS  IN  PUBLIC  EMPLOYMENT 

REPORT   OF   THE   PENSION   COMMITTEE   OF   THE 
NATIONAL   MUNICIPAL    LEAGUE 

PREPARED    BY    PAUL    STUDENSKY 
Director  of  the  Bureau  of  State  Research  of  the  New  Jersey  State  Chamber  of  Commerce 

CHAPTER  I 
MAIN   DEFECTS   OF   EXISTING   SYSTEMS 


The  pension  legislation  in  this  coun- 
try has  been  until  recent  years  a  bad 
growth — bad,  not  in  the  sense  that  it 
has  been  unnecessary  and  fundamen- 
tally evil  (quite  on  the  contrary,  it  has 
been  very  necessary)  but  in  the  sense 
that  it  has  developed  along  unsound 
lines.  For  it  is  a  matter  that  has  a 
broad  public  aspect.  It  vitally  affects 
the  public  as  the  consumer  of  govern- 
mental services  and  as  the  party  that 
pays  the  bill;  and  the  public  employes 
who  are  distressed  in  the  absence  of  a 
pension  system  or  benefited  by  its 
establishment .  Yet  it  has  been  allowed 
until  recently  to  grow  up  as  practi- 
cally "private  legislation." 

PRIVATE   PENSION   LEGISLATION 

The  government  officials,  legisla- 
tors, the  large  body  of  public  employes 
and  the  public  have  been  particularly 
inert  in  the  matter.    As  a  consequence. 


97 


here  and  there  small  groups  of  public 
employes,  usually  the  older  men,  partic- 
ularly concerned  with  their  own  pro- 
spective retirement  and  lack  of  re- 
sources, have  taken  the  steps  before 
their  legislature  to  secure  some  legisla- 
tion that  would  relieve  their  anxiety. 
They  were  the  pioneers  in  pension 
legislation,  but  their  pioneering  was 
characterized  by  a  very  narrow  outlook. 
They  were  framing  pension  bills  to  suit 
their  own  case  or  that  of  the  particular 
group  of  which  they  were  members. 
They  were  not  concerned  with  other 
groups  of  public  employes,  the  stimula- 
tion of  efficient  service,  the  economic 
distribution  of  costs  and  the  financial 
soundness  of  the  system  which  they 
were  seeking  to  establish. 

Having  framed  a  bill  that  would 
meet  their  views  of  a  retirement  sys- 
tem, they  would  look  for,  and  usually 
find,  a  legislator,  himself  unacquainted 
with  the  problem,  who  would  be  willing 


48328, 


98' 


NATIONAL  MUNICIPAL  REVIEW 


[April 


to  introduce  the  bill.  The  legislators 
would  pass  it  because  of  friendship  for 
the  sponsor  and  compassion  for  the 
beneficiary  or  beneficiaries  of  the  meas- 
ure and  often  because  of  political 
influence.  Thus  the  practically  pri- 
vate pension  bill  would  become  a  law. 

NON-CONTRIBUTORY    FREE    PENSIONS 

Sometimes  the  retirement  system 
established  thereby  would  merely  pro- 
vide for  the  payment  of  pensions 
directly  from  the  public  treasury  and 
the  expectation  would  be  that  the 
latter  would  furnish  the  pensions  ad 
infinitum.  The  expectation  is  usually 
far  too  optimistic.  It  overlooks  some 
very  important  facts.  In  the  first 
place  the  cost  of  pensions  is  very  great, 
—  far  greater  than  usually  realized. 
Secondly,  the  pension  payments  which 
the  systems  must  make  on  account  of  a 
definite  force  are  not  distributed 
evenly  from  year  to  year.  The  first 
payments  are  usually  very  small  as 
only  few  retire  in  the  beginning.  The 
bulk  of  the  payments  crowd  towards 
later  periods  when  the  present  young 
employes  who  constitute  the  bulk  of 
the  force  become  eligible  for  retirement. 
When  this  time  comes,  which  is  thirty 
or  more  years  distant,  the  annual  ap- 
propriation for  pensions  becomes  so 
heavy  that  the  government  is  often 
impelled  either  to  curtail  the  benefits  or 
to  reorganize  the  system  at  a  heavy 
additional  expense  or,  perhaps,  even 
to  discontinue  it. 


BADLY    PLANNED,   INSOLVENT    PENSION 
FUNDS 

Frequently  the  system  established 
by  such  legislation  provides  for  the 
establishment  of  a  special  pension  fund 
in  which  the  revenues  necessary  to 
make  the  future  payments  could  be 
accumulated  and  from  which  all  pen- 


sions could  be  paid.  Unfortunately 
the  revenues  of  the  fund  are  fixed 
arbitrarily  without  any  actuarial  esti- 
mate as  to  whether  they  will  be  suffi- 
cient or  not  to  cover  the  cost  of  the 
benefits  promised.  They  usually  are 
composed  of  a  contribution  from  the 
employes  of  one  or  two  per  cent  of  salary 
and  of  miscellaneous  revenues  from  the 
public  treasury  such  as  fees  from  vari- 
ous licenses  and  permits  covering  dogs, 
revolvers,  dancing  halls,  picture  shows, 
etc.,  fines,  proceeds  from  condemned 
property  and  sometimes  a  direct  ap- 
propriation by  the  government  of  one 
or  two  per  cent  of  salary. 

The  situation  is  just  as  bad  as  it 
would  be  if  an  insurance  company  that 
would  contract  itself  to  pay  a  $1,000 
insurance  policy  would  fix  the  premium 
at  an  arbitrary  and  inadequate  rate  of, 
say,  one  dollar.  Neither  the  company 
nor  the  policyholders  would  know  how 
long  it  would  be  able  to  pay  these 
policies.  The  state  does  not  allow  the 
insurance  companies  to-day  to  operate 
in  such  a  reckless  and  blind  fashion. 
Each  company  must  exact  premiums 
which  in  accordance  with  the  tables 
of  mortality  will  be  sufficient  to  cover 
the  cost  of  the  policies  contracted 
for  and  it  must  set  aside  annually 
a  certain  reserve  so  that  the  policy- 
holders who  depend  on  the  company's 
ability  to  fulffil  its  contract  be  well 
protected  against  loss.  Yet  there  is 
nothing  on  the  statute  books  to-day 
in  various  states  that  would  prevent 
the  operation  of  pension  systems  that 
are  not  founded  on  an  actuarial  cost 
basis  and  that  make  greater  promises 
than  what  they  can  fulfill. 

Of  course,  the  promoters  of  every 
such  pension  fund  hope  that  when  its 
resources  give  out,  an  amendment  will 
be  secured  increasing  the  revenues  or 
saddling  upon  the  public  treasury  an 
obligation  to  cover  any  deficit  which 
the  fund  may  develop,  and  it  often 


1922] 


PENSIONS  IN  PUBLIC  EMPLOY^IENT 


99 


happens  when  these  inevitable  con- 
tingencies arise,  that  such  amendments 
are  secured.  But — and  here  is  a  fact 
which  is  ignored  by  the  managers  of 
these  systems — there  is  a  limit  to  the 
financial  ability  and  happy-go-lucky 
attitude  of  the  administrative  official. 
A  day  comes  when  the  latter  finds  that 
these  pension  funds  with  their  in- 
adequate reserves,  or  no  reserves  at 
all,  and  with  their  constantly  increasing 
drafts  on  the  public  treasury  are  a  con- 
siderable financial  burden.  He  then 
makes  a  move  for  a  reduction  of  the 
benefits  or  other  readjustment  of  the 
system  which  is  not  altogether  pleas- 
ant to  the  members  of  the  fund. 
Such  breakdowns  of  pension  funds 
have  occurred  in  a  number  of  states  and 
cities.  Suffice  it  to  mention  the  New 
York  City  Teachers'  Retirement  Fund 
which  became  bankrupt  in  1916  and 
had  to  be  completely  reorganized;  the 
New  York  City  PoUce  Pension  Fund, 
whose  annual  deficiency  amounts  to 
over  $2,000,000;  and  numerous  funds 
in  New  Jersey.  Everywhere,  except 
where  the  funds  have  been  so  recently 
organized  that  they  did  not  have  the 
time  to  develop  trouble,  breakdowns 
of  the  funds  have  occurred. 


INEQUITABLENESS   AND    CONFUSION 
OF  MANY   SYSTEMS 

In  addition  to  the  financial  insta- 
bility and  insolvency  of  the  pension 
systems,  the  inequitableness  in  the 
provisions  of  these  systems  and  the  in- 
consistencies and  confusion  in  pension 
legislation  are  most  startling.  Since 
each  group  of  employes,  as  stated,  has 
framed  and  secured  its  own  pension 
law  without  regard  to  other  pension 
laws  and  to  the  needs  of  other  classes 
of  employes,  a  multiplicity  of  pension 
laws  which  widely  differ  from  each 
other  have  grown  up  on  the  statute 
books  in  almost  every  state.    Some  of 


these  provide  for  systems  that  are  con- 
tributory, others  for  those  that  require 
no  contributions.  Some  establish  a 
certain  rate  of  contributions  or  kind  of 
revenues,  others  another  rate  and 
another  kind.  Some  provide  benefits 
of  a  certain  type,  amount  and  under 
certain  conditions.  Others  provide 
benefits  of  another  kind,  amount  and 
and  under  other  conditions.  These 
differences  usually  cannot  be  justified 
on  the  basis  of  any  principle,  equity 
or  practical  consideration.  They  lead 
to  jealousies,  extravagance  and  de- 
moralization of  the  service. 

GROWING   DISSATISFACTION    WITH 
EXISTING   SYSTEMS 

The  financial  breakdowns  of  pension 
funds,  the  chaos  of  pension  legislation, 
the  repeated  annual  processions  of 
various  groups  of  employes  before  the 
legislature  clamoring  for  amendments 
of  their  existing  laws  to  increase  the 
benefits  and  grant  them  the  same 
special  privilege  that  another  group 
secured,  or  increase  the  revenues  of 
their  system  to  save  it  from  collapse, 
or  pleading  for  enactments  that  would 
establish  a  special  pension  fund  for 
them  if  they  had  not  been  previously 
provided  for, — all  this  chaos  and  annoy- 
ance, bordering  on  scandal,  has  in  many 
states  at  last  attracted  the  attention  of 
the  legislators,  administrative  officials, 
broad-minded  employes,  and  the  public 
at  large. 

EFFORTS  JOWARDS   REORGANIZATION 

The  states  of  Massachusetts,  New 
Jersey,  Illinois,  New  York,  Pennsyl- 
vania, Ohio,  Connecticut,  Vermont, 
Minnesota,  Wisconsin,  and  the  cities 
of  New  York,  Boston,  Milwaukee, 
San  Francisco  and  others  have  started 
an  effort  to  cure  this  evil  situation.  In 
each  of  these  states  or  cities  a  commis- 


100 


NATIONAL  MUNICIPAL  REVIEW 


[April 


sion  or  committee  was  created  for  this 
purpose  consisting  either  of  legislators, 
or  of  administrative  officials,  or  of 
leaders  among  the  employes,  or  of  a 
mixed  natm'e.  Most  of  these  commis- 
sions or  committees  secured  actuarial 
assistance  and  devised  measures  for  the 
legislature  that  would  reorganize  the 
whole  pension  system  of  their  state  or 
city  on  a  sound  actuarial  basis. 
The  task  of  these  committees  was  not 
an  easy  one,  for  opposition  to  reorgan- 
ization was  encountered  from  those 
who  preferred  the  old  order. 

In  only  very  few  instances,  usually 
those  where  only  a  limited  program  was 
adopted  by  the  commissions,  have 
they  succeeded  in  carrying  out  all  their 
recommendations.  Where  a  compre- 
hensive program  was  planned  usually 
only  a  part  of  it  was  carried  into  eflfect. 
Thus,  for  example,  in  New  Jersey,  the 
program  adopted  by  the  commission 
called  for  the  establishment  of  a  sound 
system  for  state  employes  and  the 
reorganization  of  the  system  of  the 
teachers  and  the  municipal  employes. 
The  actual  residts  were  as  follows :  that 
part  of  the  program  which  covered  the 
teachers  was  adopted  by  the  legisla- 
ture and  carried  into  effect  in  1918; 
the  part  covering  the  state  employes 
did  not  find  its  way  to  the  statute 
books  until  1920 ;  while  the  part  cover- 
ing municipal  employes  remains  unreal- 
ized to  the  present,  in  spite  of  stren- 
uous efforts  of  its  friends  to  have  it 
enacted. 

Each  of  these  various  investigations 
has  advanced  some  new  principles  or 
methods  for  the  government  of  the 
benefits  and  resources  of  a  sound 
retirement  system.  From  these  prin- 
ciples and  methods,  which  have  never 
been  reviewed  nor  compiled  except  in 
the  field  of  teachers'  pensions,  the  com- 
mittee has  selected  those  which  it 
believes  are  the  best. 


UNSOUND    RETIREMENT    SYSTEM    FOR 
FEDERAL   EMPLOYES 

Before  passing  on  to  the  efforts  at 
reorganization,  a  few  words  must  be  said 
about  the  unfortunate  retirement  situ- 
ation in  the  federal  service.  For  the 
same  unsound  tendencies  as  are  de- 
scribed above,  only  in  a  still  more  magni- 
fied form,  have  developed  in  that  field. 
For  years  the  administrative  branch  of 
the  government  failed  to  take  an  ener- 
getic step  towards  the  development  of 
a  sound  retirement  system.  For  years 
Congress  refused  to  consider  seriously 
the  idea  of  a  retirem.ent  system.  Final- 
ly, the  leaders  of  the  employes  exas- 
perated by  this  policy  of  procrastina- 
tion on  one  side  and  opposition  on  the 
other,  took  the  matter  into  their  own 
hands.  They  framed  a  retirement 
bill  which  was  unsound  in  almost  every 
respect  but  well  adapted  to  the  prej- 
udices of  Congress  and  of  the  mass  of 
employes  in  the  matter.  The  opposi- 
tion of  Congress  to  expenditures  by 
the  government  for  retirement  was 
appeased  by  providing  that  for  the 
first  few  years  all  the  expenditures  for 
retirement  should  be  met  by  using  the 
monies  supplied  by  the  contributions 
of  the  employes.  The  objections  of 
the  employes  to  contributing  were 
quieted  by  fixing  their  contributions 
at  a  very  low  rate — %}/2  per  cent  of 
salary.  Few  members  of  Congress, 
when  the  bill  came  before  them  in  1920, 
inquired  into  the  futm-e  burdens  of 
this  system  and  the  soundness  of  the 
method  by  which  these  burdens  were 
to  be  met.  Most  were  interested  in 
but  one  question  so  far  as  the  financial 
phases  of  the  proposal  were  concerned : 
Will  the  bill,  if  enacted,  require  any 
large  appropriations  in  the  more  or 
less  immediate  future,  or  not  ?  Assured 
that  it  will  not,  they  lent  their  support 
to  the  measure.  The  bill  was  passed 
and  the  President  gave  it  his  approval. 


1922] 


PENSIONS  IN  PUBLIC  EMPLOYMENT 


101 


Thus  at  last  a  retirement  system  has 
been  enacted,  but  unfortunately  one 
that  is  not  sound.  Obligations  amount- 
ing to  hundreds  of  millions  of  dollars 
have  been  placed  on  the  statute  books 
and  charged  to  the  people  of  this 
country  through  the  instrumentality  of 
this  system  without  a  sound  and  ade- 
quate method  for  their  discharge.  One 
evil  situation — the  lack  of  any  retire- 
ment provision-has  been  ciu'ed  by  the 
creation  of  another  bad  situation  in  its 
stead — the  establishment  of  a  retire- 
ment provision  which  is  deficient  in 
its  financial  basis. 

For,  whereas  the  government  needs 
not  to  contribute  until  the  fund  created 
by  the  employes'  contributions  is 
exhausted  by  the  annual  disbursements 
for  pensions  the  government  will,  hav- 
ing once  begun  to  contribute,  do  so  at  a 
rapidly  increasing  rate  and  will  in  the 
course  of  time  pay  manifold  for  its 
failure  to  bear  its  proper  share  of  the 
burden  in  the  beginning.  It  will  have 
to  pay  for  dissipating  the  monies  paid 
by  the  employes.  These  monies  should 
have  been  set  aside  and  invested  for 
them  at  interest  to  constitute  reserves 
for  their  future  benefits,  instead  of 
being  paid  out  in  benefits  to  others. 
The  government  will  have  to  pay  back 
to  the  employes  the  dissipated  prin- 
cipal with  interest.  It  will  have  to 
pay  in  large  instalments  and  with 
heavy  interest  charges  its  accrued  and 


normal  liabilities  for  the  discharge  of 
which  it  should  have  begun  to  con- 
tribute and  set  aside  reserves  from 
the  beginning.  As  there  is  no  corre- 
lation under  the  present  system  be- 
tween the  benefits  offered  and  the 
contributions  paid,  the  tendency  will 
be  to  liberalize  the  benefits  unduly, 
without  considering  the  costs,  with  the 
result  that  the  burdens  for  the  govern- 
ment will  be  still  further  increased. 

The  establishment  of  a  retirement 
provision  for  several  hundred  thou- 
sand employes  is  an  undertaking  of 
great  magnitude,  replete  with  far- 
reaching  consequences.  It  is  unfor- 
tunate that  it  should  have  been  so  mis- 
handled and  should  have  resulted  in  the 
enactment  of  a  measure  so  thoroughly 
imsound  as  this  one,  at  a  moment 
when  state  after  state  are  endeavoring 
to  extricate  themselves  from  the  evils 
of  unsound  pension  legislation. 

Years  will  pass  before  the  unsound 
financial  features  of  this  system  will 
be  remedied,  if  they  ever  will,  for  as 
diSicult  as  the  reorganization  of  pen- 
sion systems  generally  is,  the  difiiculties 
in  the  reorganization  of  this  system 
will  be  multiplied  because  of  its  gigan- 
tic size  and  the  huge  amounts  running 
into  millions  of  dollars  which  will  have 
to  be  raised  in  case  of  the  readjust- 
ment of  the  system,  in  order  to  provide 
for  the  obligations  which  are  now  un- 
duly shifted. 


CHAPTER  II 
PRELIMINARIES   OF  A   SOUND   SYSTEM 


1 .  Need  for  Retirement  Provisions  and 
Their  Purpose. — The  establishment  for 
public  employes  of  provisions  for  old 
age,  or  disability,  is  desirable  in  order 
to  make  possible  a  humane  and  effec- 
tive retirement  from  the  service  of  the 
superannuated  and  disabled  and  also 
in  order  to  assure  the  employes  and 
their  dependents  a  means  of  support 


when  they  are  no  longer  capable  of 
earning  a  living.  The  establishment 
of  a  retirement  system  is  just  as 
desirable  in  a  well-conducted  govern- 
mental service  and  in  the  employe's 
own  system  of  living  as  is  the  establish- 
ment of  a  proper  depreciation  account 
for  equipment,  plant,  etc.,  in  a  well- 
conducted  business.    For  the  employe's 


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NATIONAL  MUNICIPAL  REVIEW 


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earning  capacity  depreciates  and  is 
brought  to  naught  in  the  long  run  as  he 
reaches  old  age  or  is  prematurely- 
disabled.  It  is  not  only  proper  but 
imperative,  therefore,  that  every  year 
that  the  employe  enjoys  his  activities 
and  that  the  employer  uses  his  serv- 
ices a  contribution  should  be  made 
towards  the  time  of  this  depreciation 
so  that  when  the  time  comes  the 
employe    could    be    properly    retired. 

This  principle  asserts  that  two 
interests  are  involved  in  a  retirement 
system :  the  interest  of  the  service  and 
that  of  the  employe  (and  his  depend- 
ents) ,  and  that  the  requirements  of  each 
must  be  fairly  met.  Very  often  retire- 
ment systems  are  framed  with  only 
one  interest  in  mind — that  of  the  effi- 
ciency of  the  service,  or  that  of  the 
employe,  depending  on  whether  the 
employing  authority  or  the  employe 
is  framing  the  system.  This  prin- 
ciple, if  adopted  and  laid  into  the  foun- 
dation of  every  retirement  system 
would  obviate  such  one-sidedness .  The 
committee  definitely  discards  in  this 
statement  the  idea  of  a  pension  as 
a  reward  for  long  and  faithful  service 
or  a  gratuity.  It  places  the  retirement 
system  on  a  very  definite  economic 
basis  as  an  essential  part  of  a  good 
system  of  administration  of  the  person- 
nel as  well  as  an  important  element  in  a 
well-conceived  system  of  living  for  the 
employe. 

Furthermore,  it  asserts  that  all 
classes  of  public  employes  ought  to  be 
covered  by  retirement  provisions. 
There  is  great  need  for  the  recognition 
of  this  truth.  Most  of  the  present 
systems  are  founded  on  the  considera- 
tion that  the  particular  group,  whether 
it  be  teachers,  or  policemen,  or  another 
group,  is  entitled  to  exclusive  or  fore- 
most attention  of  the  legislature  or 
administration  in  the  retirement  mat- 
ter. The  committee  recognized  that 
it  may  often  be  impossible  to  cover  at 


once  all  the  classes  of  public  employes 
by  a  retirement  provision;  that  certain 
groups  may  have  to  be  singled  out  as 
the  first  to  be  benefited.  But  it  sug- 
gests that  at  least  careful  judgment  be 
used  in  such  cases.  The  present  situ- 
ation in  which  the  bestowing  of  retire- 
ment provisions  is  determined  by  the 
insistence  and  ability  of  the  particular 
group  to  secure  the  provision,  is  highly 
unsatisfactory. 

2.  Development  of  Provisions  in  Joint 
Consultation. — 'As  the  retirement  ques- 
tion vitally  concerns  the  state,  the  em- 
ploying body  which  is  responsible  before 
the  community  for  the  maintenance  of 
efficient  service  and  the  employes  who 
are  responsible  for  the  maintenance 
of  themselves  and  their  dependents 
throughout  their  lives,  and  involves 
certain  mutual  responsibilities  between 
them,  it  is  highly  desirable  that  the 
framing  of  retirement  provisions  be 
carried  out  in  joint  consultation  be- 
tween the  legislators,  the  representa- 
tives of  the  employing  authorities  and 
the  representatives  of  the  employes  so 
that  all  interests  should  be  equitably 
taken  into  account.  The  representa- 
tives of  the  employing  body  and  the 
employes  should  be  of  the  highest 
caliber.  Those  of  the  employes  should 
be  selected  by  their  associations  and  be 
few  in  number  to  permit  intelligent 
round-table   conference. 

3.  Expert  Technical  Assistance. — 'As 
the  framing  of  a  sound  retirement 
provision  involves  actuarial  calcula- 
tions of  cost  of  the  proposed  benefits 
and  other  higlily  technical  work,  the 
body  vested  with  the  duty  of  framing 
the  provision  should  be  provided  with 
expert  technical  assistance  including 
an  actuary  familiar  with  the  pension 
problem  and  other  experts. 

4.  A  State  Policy. — In  order  that 
there  should  be  true  equity  between 
the  various  groups  of  public  employes 
and  a  sound  and  firm  foundation  for 
their  retirement  provisions  there  ought 
to  be  enacted  into  law  in  every  state 
where  pension  provisions  are  in  opera- 


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PENSIONS  IN  PUBLIC  EMPLOYMENT 


103 


tion,  or  are  thought  desirable,  a  definite 
state  pohcy  governing  the  question  of 
retirement.  This  law  should  lay  down 
the  fundamental  provisions  which  any 
retirement  system  should  contain  and 
the  conditions  under  which  any  depart- 
ment of  the  state  or  any  county  or 
municipality  or  any  one  of  their  depart- 
ments can  establish  a  retirement 
system,  or  can  come  under  the  scope 
of  an  existing  system.  This  fundamen- 
tal charter  should  be  sufficiently  broad 
to  permit  the  introduction  in  the  vari- 
ous systems  of  such  variations  in  detail 
as  may  be  required  by  the  different 
conditions  to  which  the  systems  are 
applied. 

5.  State,  County  and  Municipal 
Pension  Funds. — The  organization  of 
retirement  funds  should  follow  broad 
and  natural  lines  which  would  make 
possible  the  gradual  orderly  extension 
of  retirement  provisions  from  one  sub- 
division of  the  service  or  class  of 
employes  to  another,  and  the  sound 
operation  of  the  fund.  Within  each 
fund  the  members  should  be  divided 
into  proper  occupational  and  sex  groups 
so  that  differences  in  the  benefits, 
retirement  age  and  the  rates  of  contribu- 
tions could  be  established  in  accordance 
with  the  difference  in  the  hazards  of 
their  occupation,  cost  of  their  benefits, 
requirements  of  their  service,  and  other 
factors. 

As  a  result  of  the  independent  action 
of  various  groups,  it  often  happens  that 
multiplicity   of   small  pension  funds, 


each  covering  a  certain  department  or 
a  small  local  unit,  are  set  up.  There 
can  be  neither  efficient  administration 
nor  financial  stability  under  such  ar- 
rangement. A  consolidation  of  small 
related  units  into  larger  natural  units, 
such  as  suggested,  is  highly  desirable. 
All  state  employes  should  be  grouped 
into  one  state  fund.  The  employes  of 
a  county  into  one  county  fund.  Those 
of  a  municipality  into  one,  or  in  case  of 
large  municipalities,  few  funds  operated 
under  the  same  law  and  centralized 
authority.  The  teachers  should  be 
grouped  into  one  state-wide  fund, 
except  those  in  the  largest  municipali- 
ties, where  a  special  local  fund  may  be 
constituted  for  them  without  present- 
ing the  dangers  mentioned.  Further 
considerations  may  be  desirable,  unit- 
ing, for  example,  a  county  and  a  munic- 
ipality that  are  related,  into  one 
pension  fund  unit. 

The  suggested  subdivision  of  the 
members  within  each  fund  according 
to  occupation  works  towards  equitable 
arrangement  and  financial  stability^ 
The  following  is  a  fair  classification:  (1) 
policemen;  (2)  firemen;  (3)  mechanics,, 
street  cleaners,  laborers  and  other 
workers  engaged  upon  duties  requiring 
mainly  physical  exertion;  (4)  clerical, 
administrative  and  technical  workers 
engaged  upon  duties  requiring  mainly 
mental  exertion;   (5)  teachers. 


CHAPTER  III 
FINANCIAL   STRUCTURE 


6.  Actuarial  Basis. — The  retirement 
system  should  be  established  and 
operated  on  an  actuarial  basis,  i.e., 
on  the  basis  of  tables  prepared  by 
actuaries,  of  the  mortality  and  with- 
drawals from  the  service  and  cost  of 
benefits.  Each  year  throughout  the 
service  of  each  employe,  there  should 
be  set  aside  and  invested  with  interest 


a  certain  contribution  which  would 
accumulate  a  reserve  from  which  his 
retirement  allowance  could  be  event- 
ually paid. 

In  other  words  a  retirement  system 
should  operate  on  the  basis  of  statisti- 
cal and  actuar  al  investigation  just  as 
insurance  systems  do.     The  actuaries 


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NATIONAL  MUNICIPAL  REVIEW 


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determine  what  reserves  are  necessary 
at  different  ages  of  retirement  to  make 
possible  the  payment  of  an  annuity  of 
$1  to  those  retired  at  these  ages,  to  the 
end  of  their  hves.  These  reserves  are 
figured  as  averages  for  the  groups  of 
the  same  age.  Some  of  those  within 
the  same  group  may  live  longer  than 
the  average  time  for  their  group,  and 
draw  more  in  retirement  allowances 
than  their  reserve,  while  others  may 
live  shorter  than  the  average  time  and 
draw  less.  The  deficiences  in  the  former 
case  will  be  covered  from  the  surpluses 
in  the  latter,  and  the  average  for  the 
gi-oup  will  hold  true.  The  accumula- 
tion of  the  reserve  begins  when  the 
employee  becomes  a  member  of  the 
retirement  system  and  it  ends  on  his 
retirement;  then  the  expenditure  of 
his  reserve  begins.  When  the  employ- 
ing body  promises  a  certain  retirement 
allowance,  the  actuaries  determine 
what  its  obligations  on  a  reserve  basis 
on  that  account  are  and  what  contribu- 
tions must  be  paid  by  it  every  year  to 
accumulate  the  reserves  that  would 
cover  them.  If  the  prospective  assets 
that  the  fund  will  realize  from  these 
contributions  equal  the  prospective 
liabilities,  the  fund  is  solvent. 

Among  the  advantages  of  the  reserve 
basis  of  operation  the  following  may  be 
mentioned : 

(1)  It  is  in  accord  with  the  policy 
of  "pay  as  you  go."  It  distributes 
equitably  and  economically  from  year 
to  year  the  burdens  of  the  supporters 
of  the  system  and  to  that  extent  is 
sound  finance.  The  employing  body 
bears  each  year  the  proper  normal 
share  of  the  total  obligations  it  assumes. 
Each  year  the  services  are  rendered  it 
raises  the  monies  covering  that  part  of 
future  pensions  which  is  on  account 
of  the  services  rendered  that  year;  each 
generation  of  taxpayers  defrays,  there- 
fore, its  own  pension  obligation.  And 
similarly  the  employee, if  they  contrib- 


ute, bear  each  year  the  proper  normal 
share  of  obligations  they  assume. 
Each  year  they  set  aside  from  their 
salary  the  sum  of  money  necessary  to 
cover  that  share  of  their  future  bene- 
fit which  is  on  account  of  that  year. 
The  burdens  of  both  the  employing 
body  and  the  employers  are  levelled 
throughout  years  and  do  not  accumu- 
late towards  later  periods  as  they  do  in 
the  absence  of  a  reserve. 

(2)  It  is  in  accord  with  the  concept 
of  a  retirement  provision  as  a  charge 
for  depreciation  of  the  employe's  forces, 
for  it  places  a  proper  portion  of  the 
charge  on  each  year  responsible  for  the 
depreciation. 

(3)  The  cost  of  the  benefit  is  defi- 
nitely known  with  the  result  that  only 
such  benefits  are  provided  as  are  within 
the  financial  abilities  of  the  partici- 
pants and  the  possibility  of  inequi- 
table division  of  cost,  misunderstand- 
ing   and    dissatisfaction    is    reduced. 

(4)  The  system  is  maintained  in  a 
solvent  condition. 

(5)  The  annual  cost  is  reduced  by 
the  fact  that  interest  is  earned  on 
investment. 

7.  Joint  Contrihidory  Prmciple. — ■ 
The  division  of  cost  of  retirement  pro- 
visions between  the  employing  body 
and  the  employes  will  be  generally 
found  more  practical  and  in  the  long 
run  more  satisfactory  to  both  sides, 
than  the  placement  of  the  whole  bur- 
den on  either  one  or  the  other  side.  In 
adopting  it,  care  must  be  taken  that 
the  division  be  truly  co-operative, 
equitable  and  sound. 

The  advantages  of  the  joint  contribu- 
tory principle  favored  by  the  com- 
mittee are  many : 

(1)  It  is  more  economical  and 
practical  than  the  other  systems  men- 
tioned, as  it  avoids  heavy  taxing  of 
either  the  resources  of  the  employing 
body  or  the  earnings  of  the  employe 
and  facilitates  thereby  the  establish- 


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PENSIONS  IN  PUBLIC  EMPLOYMENT 


105 


ment  and  maintenance  of  so  costly  an 
undertaking  as  the   pension   system. 

(2)  It  leads  to  an  equitable  and 
desirable  readjustment  of  expenditures 
of  both  the  employing  body  and  the 
employe. 

(3)  It  checks,  if  properly  conceived, 
extravagant  demands  on  the  part  of  the 
employes  as  it  makes  the  latter  partici- 
pate in  the  increase  of  cost  that  would 
result  from  the  grant  of  such  demand; 
and  it  fosters,  therefore,  a  steady, 
sound    development    of    the    system. 

(4)  It  calls  for  the  participation 
of  the  employes  in  the  management 
of  the  system — a  feature  which  helps 
the  harmonious  development  of  the 
system. 

(5)  It  is  in  accord  with  the  funda- 
mental philosophy  just  stated,  that  both 
the  employing  body  and  the  employe 
are  benefited  from  and  interested  in 
the  establishment  of  a  retirement  sys- 
tem and  ought,  therefore,  to  contribute 
to  it. 

(6)  It  is  also  in  accord  with  the 
theory  that  the  faculties  of  the  employe 
are  being  used  up  by  the  industry  or 
service  in  which  he  is  employed  as  well 
as  by  his  own  personal  pursuits  and 
enjoyments  and  that,  therefore,  a 
joint  responsibility  rests  upon  the  indus- 
try or  service  and  upon  the  employe  for 
the  upbuilding  of  proper  means  that 
would  sustain  the  employe  during  the 
time  when  these  faculties  shall  have 
been  destroyed. 

(7)  It  does  not  develop,  as  the  other 
systems  do,  grievance  in  one  party 
against  the  other  to  the  effect  that  it 
has  to  bear  the  other's  responsibilities 
and  burdens. 

(8)  It  leads  in  the  long  run  to 
greater  mutual  satisfaction  and  co- 
operation. 

The  joint  contributory  principle  has 
been  adopted  in  almost  all  sound  pen- 
sion systems  in  this  country.  The 
prevailing  tendency  of  these  systems 


is  towards  arriving  in  the  long  run  at  a 
more  or  less  equal  division  of  the  cost 
between  the  employing  body  and  the 
individual  employe.  This  more  or  less 
equal  division  is  applied  to  the  cost  of 
the  benefits  on  account  of  future  serv- 
ices. Accrued  liabilities  (which  arise 
out  of  the  past  services)  and  the  cost 
of  benefits  on  account  of  injuries  sus- 
tained or  death  occasioned  in  the  per- 
formance of  duty  are  usually  borne 
entirely  by  the  employing  body.  As 
instances  of  such  arrangements,  the 
systems  for  the  state  employes  of 
New  York,  New  Jersey  and  Massachu- 
setts, the  municipal  system  of  New  York 
City  and  San  Francisco  and  the  pro- 
posed municipal  system  of  Boston  may 
be  mentioned,  besides  practically  all 
the  sound  teachers'  pension  systems  of 
the  country.  Among  the  few  instances 
where  a  different  division  of  cost  has 
been  adopted  is  the  system  of  Chicago, 
where  the  city's  normal  contribution  is 
about  75  per  cent  higher  than  that  of 
the  employees;  the  Milwaukee  project 
under  which  the  city  is  to  bear  three- 
fourths  of  the  cost  of  the  policemen's 
and  firemen's  superannuation  and  two- 
thirds  of  that  of  the  teachers;  and  Yon- 
kers'  project,  where  the  division  is  55 
per  cent  for  the  city  and  45  per  cent 
for  the  employe. 

8.  The  Non-Contributory  System. — ■ 
If  the  so-called  "non-contributory  sys- 
tem" is  established  the  cost  of  the  pro- 
tection which  it  offers  should  be  clearly 
determined  and  brought  to  the  knowl- 
edge of  the  employing  body  and  em- 
ploye and  it  should  be  clearly  under- 
stood between  them  that  this  cost  is  not 
borne  by  the  employing  body  alone  but 
is  borne  also  in  part  by  the  employe,  for 
the  latter's  wages  are  in  the  long  run 
depressed  by  the  employing  authority 
that  seeks  to  recover  that  way  from 
the  employe's  wage  a  part  of  the  cost 
of  the  old  age,  disability  and  death 
protection  towards  which  it  feels  the 
employe  should  have  contributed. 


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The  employing  bodies  and  the  em- 
ployes prefer  sometimes  the  so-called 
"non-contributory"  system  under 
which  the  employes  do  not  directly  con- 
tribute and  nominally  the  entire  cost 
is  borne  by  the  employing  body.  The 
employing  authorities  that  prefer  it  do 
so  usually  for  one  or  more  of  the 
following  three  reasons:  They  either 
want  to  exercise  a  complete  control 
over  the  retirement  system  and  realize 
that  if  the  employes  do  not  contribute, 
the  employes  have  a  lesser  claim,  if 
they  have  any,  for  participation  in  that 
control;  or  else  they  want  to  effect  a 
saving  in  the  cost  of  administering  the 
system,  for  the  cost  of  collecting  and 
recording  individual  contributions  is 
sometimes  very  considerable.  Or 
they  may  desire  to  avoid  a  controversy 
with  the  employes  who  may  object  to 
any  other  system. 

The  frequent  preference  of  the 
employes  for  it  may  be  explained  by 
the  following  reasons: 

1.  The  employes  who  are  most 
interested  in  the  question  of  protection 
against  old  age,  disability  or  deaths 
are  usually  the  older  employes;  they 
naturally  regard  the  retirement  allow- 
ance as  a  reward  for  their  long  and 
faithful  service ;  even  though  they  may 
be  willing  to  contribute,  they  cannot 
possibly  contribute  more  than  a  small 
portion  of  the  cost  of  their  retirement 
allowance  in  the  course  of  the  few  years 
left  for  them  to  serve;  they  cannot, 
therefore,  regard  very  seriously  their 
contributing  to  their  retirement  and 
are  naturally  inclined  to  believe  that 
the  employer  could  as  well  provide 
their  retirement  entirely  at  his  expense, 
without  bothering  about  such  a  baga- 
telle as  their  contribution, 

2.  The  younger  employes  who  con- 
stitute the  bulk  of  the  entire  personnel 
are  usually  not  interested  in  the  ques- 
tions of  protection  against  these  con- 
tingencies, for  the  latter  seems  very 


distant.  They  could  contribute  with- 
out much  hardship  a  considerable  por- 
tion of  their  retirement  allowance  by 
setting  aside  each  year  a  small  portion 
of  their  wage,  but  they  usually  do  not 
care  to  do  so,  for  they  want  all  their 
money  for  the  satisfaction  of  their 
immediate  needs  and  pleasures.  They 
feel  that  if  the  employer  is  interested 
in  establishing  a  provision  for  their  old 
age  or  disability  or  death  he  should  do 
it  entirely  at  his  own  expense  without 
calling  for  any  contribution  on  their 
part. 

3.  The  men  or  women  in  their  late 
thirties  or  forties  stand  in  between 
the  extreme  helplessness  against  these 
contingencies  represented  by  the  first 
class  and  the  extreme  lack  of  care  of 
the  second;  they  think  of  their  future 
old  age  and  are  still  in  a  position  in  the 
course  of  the  20  or  25  years  ahead  of 
them  to  contribute  a  respectable  por- 
tion of  their  old-age  benefits;  if  they 
favor  a  so-called  "non-contributory" 
system  they  do  so  because  they  feel 
that  their  money  wage  is  increased  to 
the  extent  that  it  permits  them  to  apply 
to  some  other  purpose  the  portion 
which  they  would  have  otherwise  set 
aside  for  foregoing  contingencies,  in 
other  words  that  it  practically  increases 
their   wage. 

Granting,  therefore,  that  under 
some  conditions  so-called  non-con- 
tributory systems  will  be  established, 
the  committee  argues  in  favor  of  an 
effort  to  dispell  the  misunderstandings 
which  often  in  such  cases  develop. 
The  employing  authorities  usually  con- 
ceive that  they  are  really  paying  the 
entire  cost  of  such  a  system.  They 
tend  to  exaggerate  the  value  of  the 
benfits  they  offer  and  unduly  depress 
the  wages  on  this  account.  Employes 
also  beheve  that  their  employer  pays 
the  whole  cost  of  the  non-contributory 
system  and  do  not  realize  that  they  are 
really  paying  a  part  of  it  in  the  form  of 


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PENSIONS  IN  PUBLIC  EMPLOYMENT 


107 


the  depressed  wage.  They  tend  either 
to  undervalue  the  benefit  and  conse- 
quently be  dissatisfied  with  the  wage  to 
which  the  benefit  is  an  addition,  or 
else  to  overestimate  it  and^  conse- 
quently, be  willing  to  accept  a  lower 
wage  on  this  account  than  what  the 
circumstances  warrant. 

The  worse  of  these  misunderstand- 
ings and  inequitable  results  could  be 
avoided  if  the  cost  of  the  benefit  offered 
were  known  and  an  equitable  relation 
of  the  benefit  to  the  wage  were  deter- 
mined and  established. 

9.  Contribution  of  Employing  Body. — 
The  accrued  liabilities  (the  liabilities 
on  account  of  the  service  rendered 
prior  to  the  establishment  of  the  system) 
should  be  discharged  by  the  employing 
body  on  a  full  reserve  or  partial  reserve 
basis,  so  that  until  they  are  finally 
liquidated  each  year  should  bear  a 
certain  equitable  normal  proportion  of 
them.  Where  the  setting  up  of  a  par- 
tial or  full  reserve  is  impossible,  the 
employing  body  should  be  fully  aware 
that  it  shifts  the  burdens  of  the  accrued 
liabilities  upon  posterity.  The  normal 
contributions  of  the  employing  body 
(the  contributions  made  on  account  of 
service  rendered  subsequent  to  the 
establishment  of  the  system)  should  be 
made  from  year  to  year  on  a  reserve 
basis.  The  administrative  expenses 
should  be  discharged  without  setting 
up  any  reserve. 

The  advantages  of  contributing  on 
a  reserve  basis  have  been  already  indica- 
ted. It  remains  to  explain  the  differ- 
ent problems  in  contributing  for  the 
services  rendered  after  the  establish- 
ment of  the  system  and  in  contribut- 
ing for  those  previously  rendered. 
In  the  former  case  the  problem  is  easy. 
Each  year  the  services  are  rendered, 
the  employing  body  contributes  on 
that  account.  Not  so  with  previous 
services.  No  contributions  have  been 
made  by  either  the  employing  body  or 
the  employe  when  they  have  been  ren- 


dered. When  credit  is  given  for  them 
a  deficiency  is  created  in  the  fund. 
This  deficiency,  known  as  the  accrued 
liabilities,  must  be  covered.  It  is 
practically  impossible  to  ask  the  em- 
ployes to  cover  any  part  of  it.  The 
employing  body  must  assume  the  re- 
sponsibility for  its  liquidation.  It  is 
impossible  for  the  government  to 
appropriate  at  once  the  amount  nec- 
essary to  cover  this  deficiency,  as  the 
latter  is  usually  very  considerable,  far 
exceeding  the  amount  of  the  payroll. 
The  expedient,  which  is,  therefore,  con- 
sidered most  practicable  is  to  distribute 
this  deficiency  over  a  certain  period  of 
years,  say  20,  25  or  more,  appropriat- 
ing each  year  a  certain  amount  so  that 
at  the  end  of  this  period  the  deficiency 
is  liquidated  and  the  fund  is  in  posses- 
sion of  all  the  necessary  reserves.  This 
annual  contribution  is  sometimes  called 
a  "deficiency  contribution"  as  dis- 
tinguished from  the  "normal  contribu- 
tion" which  is  on  account  of  subse- 
quent service.  In  some  systems,  as, 
for  example,  in  the  municipal  system 
of  New  York  City,  the  deficiency  con- 
tribution and  the  normal  contribution 
on  account  of  present  employes  are 
merged  together;  the  total  liability  is 
estimated  and  a  certain  per  cent  of  it, 
6  per  cent  in  New  York,  is  appropria- 
ted each  year  so  that  within  a  certain 
period  it  is  liquidated.  Practically  all 
sound  systems  adopt  some  method  for 
the  liquidation  of  the  accrued  and 
future  liabilities  on  a  reserve  basis. 
The  only  exception  is  the  Massachusetts 
Employes'  System. 

10.  Contrihuiions  of  Employes. — 
The  contributions  of  each  employe 
should  be  set  aside  and  invested  for 
him  until  the  time  of  his  retirement,  or 
withdrawal  from  the  fund.  They 
should  bear  a  certain  ratio  to  his  salary. 
Some  degree  of  graduation  of  the  rates 
of  contributions  according  to  the  age 
when  the  employe  begins  to  contribute 


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NATIONAL  MUNICIPAL  REVIEW 


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is  desirable  so  that  late  entrants  should 
pay  higher  rates  and  would  accumulate 
thereby  in  spite  of  the  shorter  remain- 
ing period  of  service,  a  reserve  suffi- 
cient to  provide  them  with  an  ade- 
quate benefit.  The  sex  and  occupations 
of  the  employes  should  also  be  taken 
into  account  in  fixing  the  rates. 

The  principles  expressed  in  the  first 
and  second  sentences  of  this  statement 
are  recognized  in  all  the  sound  systems 
in  this  country,  but  those  stated  in  the 
remaining  part  are  subjects  of  con- 
troversy. There  are  sound  systems  in 
which  the  rate  of  contribution  is  uni- 
form for  all  entrance  ages.  Such  is  the 
system  for  the  state  employes  of  Massa- 
chusetts where  everybody  contributes 
5  per  cent  of  salary  and  the  systems  of 
Chicago  and  the  proposed  Boston  sys- 
tem in  which  the  contribution  is  near 
4  or  5  per  cent.  They  are  more  simple, 
but   present   that   disadvantage   that 


in  case  of  late  entrants  the  benefit 
produced  is  inadequate.  Considering 
that  the  benefits  in  case  of  late  entrants 
should  also  be  adequate,  the  committee 
favors  some  degree  of  graduation  with- 
out specifying  whether  it  should  in- 
volve a  different  rate  for  each  age  or  a 
different  rate  only  for  a  certain  group 
of  ages  such  as,  for  example,  20  to  25, 
25  to  30,  etc.  Several  systems 
establish  the  same  rate  for  both  sexes 
and  all  occupations.  The  distinction 
as  to  sex  and  occupation  is  favored  here 
in  view  of  the  difference  of  mortality 
peculiar  to  each  and,  therefore,  cost. 
Unless  a  difference  in  rates  is  estab- 
lished, the  women  and  other  groups 
with  greater  longevity  either  receive 
smaller  benefits  or  else  receive  them 
to  some  extent  at  the  expense  of  the 
groups  with  a  shorter  life  expectancy 
or  at  an  additional  expense  of  the  em- 
ploying body. 


CHAPTER  IV 
BENEFITS 


11.  Contingencies  to  he  Covered  and 
Distinction  Between  the  Sources  of  the 
Benefit. — A  comprehensive  retirement 
system  should  provide  benefits  for  the 
following  contingencies :  old  age  (super- 
annuation), disability,  both  ordinary 
and  in  performance  of  duty,  death — 
ordinary  and  in  performance  of  duty; 
withdrawal  from  the  service  through 
resignation  or  dismissal.  It  is  desir- 
able that  the  retirement  allowance 
should  be  divided  into  two  distinct 
benefits:  the  "annuity"  provided  by 
the  employe's  own  accumulated  con- 
tributions and  the  "pension"  provided 
by  the  accumulated  contributions  of 
the  employing  body. 

Superannuation  is  taken  care  of  in 
all  existing  systems.  But  one  or  the 
other  contingencies  mentioned  are 
often  ignored.     Yet  they  are  of  utmost 


importance.  Disability  can  strike  a 
person  at  any  time;  death  may  leave 
his  dependents,  for  whom  he  works, 
without  means ;  the  employe  may  resign 
or  be  dismissed,  and  ought  not  lose  in 
such  case  all  the  accumulations  that 
have  been  formed  from  his  and  his 
employer's  contributions  during  his 
service  for,  should  he  incur  such  a  loss 
every  time  he  changes  employment, 
his  protection  against  the  contingencies 
of  old  age,  disability  and  death  will  be 
seriously  impaired  if  not  altogether 
destroyed.  All  these  contingencies 
must    be    equitably    provided    for. 

The  distinction  as  between  the 
sources  of  the  benefits  is  important 
because  it  is  quite  common  for  either 
the  employing  body  or  the  employes 
to  make  exaggerated  claims  as  to  the 


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PENSIONS  IN  PUBLIC  EMPLOYMENT 


109 


cost  to  them  of  their  participation  in 
the  retirement  system.  The  employer 
would  claim  that  he  pays  so  much  for 
the  employe's  future  retirement  that 
he  cannot  increase  his  wages  as  he 
ought  to,  or  that  he  must  even  reduce 
them;  while  the  employe  would  claim 
that  he  contributes  so  much  towards 
his  future  retirement  that  his  wages 
should  be  increased.  When  each  side 
knows  exactly,  as  proposed  in  the  fore- 
going principle,  how  much  of  the  pen- 
sion each  pays,  there  is  less  room  for 
exaggerated  claims  and  there  is  more 
satisfaction.  Furthermore,  at  each 
proposed  amendment  of  the  system 
the  difference  of  cost  that  would 
result  to  each  may  be  determined, 
if  this  distinction  is  adopted,  and 
proper  adjustments  in  their  respective 
budgets  and  in  the  salaries  can  be 
made  by  each  side,  thus  assuring  a 
continued  equitable  development  of 
the  system.  In  practically  all  the 
sound  systems  this  principle  is  adopted. 

12.  Relation  of  Benefits  to  Salary 
and  Length  of  Service. — Some  propor- 
tionality, either  direct  or  indirect,  or 
both,  between  the  retirement  allowance 
and  the  average  salary  of  the  employe 
is  desirable  so  as  to  assure  him  a  retire- 
ment that  will  not  be  far  removed  from 
his  standard  of  living.  The  retirement 
allowance  should  increase  with  longer 
serxace  so  as  to  give  recognition  to  a 
longer  period  of  usefulness  to  the 
employer,  of  activity  on  one's  own  be- 
half and  of  contributions  and  so  as  to 
afford  an  incentive  to  remain  longer  in 
the  service.  A  minimum  amount  of 
benefit  should  be  fixed  to  prevent  in 
any  case  the  falling  of  benefits  below  a 
level  under  which  it  is  impossible  to 
cover  the  necessities  of  life. 

That  some  degree  of  proportionality 
to  salary  and  length  of  service  is  de- 
sirable is  generally  admitted.  The 
disagreement  arises  over  the  extent  to 
which  it  is  desirable.     There  are  three 


types  of   proportionality:  the   direct, 
the  indirect  and  the  combined. 

(1)  The  direct  proportionality  is 
obtained  when  the  benefit  is  fixed  as  a 
certain  proportion  of  salary  for  each 
year  of  service. 

(2)  The  indirect,  when  the  benefit 
is  not  fixed  as  a  certain  proportion  of 
salary  and  yet  eventually  any  way 
arrives  at  some  degree  of  proportion- 
ality because  of  the  fact  that  the  con- 
tribution from  which  it  is  produced  is 
fixed  as  a  proportion  to  salary  and  is 
made  for  every  year  of  service.  There 
may  be  two  types  of  indirect  propor- 
tionality— that  derived  from  a  contri- 
bution of  uniform  percentage  for  all 
entrance  ages,  and  that  derived  from  a 
graduated  contribution.  In  the  former 
case  the  benefit  would  be  proportioned 
only  in  the  case  of  early  entrants,  in 
the  latter  in  case  of  all  entrants. 

(3)  The  combined,  direct  and  in- 
direct, proportionality  is  obtained  by 
making  the  "  pension ' '  part  of  the  retire- 
ment allowance  directly  proportional 
to  salary  and  length  of  service,  but  the 
"annuity"  part  only  indirectly  pro- 
portional. 

There  are  no  sound  systems  in  opera- 
tion in  this  country  in  the  public  serv- 
ice that  are  built  solely  on  the  first  of 
these  three  arrangements,  for  the  dis- 
advantages of  such  an  arrangement 
are  generally  considered  greater  than 
its  advantages.  The  Massachusetts 
State  Employes'  System  and  the  sys- 
tems of  Chicago,  San  Francisco  and 
Milwaukee  follow  the  second  method. 
The  Massachusetts  system  grants  such 
allowance  to  the  employe  as  a  contribu- 
tion of  10  per  cent  of  salary  (five  from 
the  employe  and  five  from  the  state) 
will  provide,  thus  indirectly  assuring 
proportional  benefits.  Several  sys- 
tems, including  those  of  New  York  and 
New  Jersey  state  employes  and  New 
York  City  municipal  employes,  follow 
the  mixed  arrangement.     Thus  in  the 


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NATIONAL  MUNICIPAL  REVIEW 


[April 


New  York  City  system  the  retirement 
allowance  is  fixed  as  follows:  (1)  An 
annuity  of  such  amount  as  the  graduat- 
ed contributions  will  provide;  in  the 
average  case  the  same  as  the  "pension"; 
(2)  a  pension  of  lixr  of  salary  for 
clerks,  i|^  for  mechanics  and  yi^ 
for  laborers  for  each  year  of  subse- 
quent service,  and  tV,  t^  and  ^V 
of  salary  for  the  three  groups  respec- 
tively for  each  year  of  prior  service. 
Thus  an  allowance  of  approximately 
half  pay  is  obtained  after  35,  34  and  33 
years  of  service  respectively.  The 
New  York  State  Employes'  and  the 
New  Jersey  State  Employes'  and  sev- 
eral other  systems  and  projects  also 
belong   to   this   class. 

The  principle  of  proportionality  is 
stated  by  the  committee  so  broadly  as 
to  include  any  of  these  types,  each  of 
which    presents    certain    advantages. 

13.  Age  the  Proper  Basis  for  Retire- 
ment.— Retirement  should  be  based 
primarily  on  age  and  only  secondarily, 
if  at  all,  on  length  of  service.  There 
should  be  a  minimum  age  after  which 
retirement  is  permissible  and  a  maxi- 
mum age  after  which  retirement  is  com- 
pulsory and  which  could  be  extended 
only  upon  proof  of  special  fitness. 
The  minimum  age  should  be  so  fixed 
as  to  result  in  neither  too  premature, 
nor  too  late  retirements.  Sufiicient 
margin  between  the  maximum  and  the 
minimum  should  be  fixed  so  as  to 
allow  for  the  variations  in  the  time 
when  one  or  another  employe  may 
become  superannuated  and  permit  the 
employe  and  his  superior  to  exercise 
sufficient  discretion  as  to  the  time  of 
his  retirement. 

In  the  old  days,  retirement  was  based 
on  length  of  service  because  the  pension 
was  conceived  as  a  reward  for  long  and 
faithful  service.  But  to-day  the  tend- 
ency is  to  base  it  on  age  because  the 
pension  is  increasingly  regarded  as  a 
means  of  protection  against  old  age. 
Furthermore,  the  "length  of  service" 


basis  does  not  work  out  to-day  as  well 
as  it  did  years  ago,  because  the  employ- 
ment becomes  increasingly  mobile,  men 
change  the  service  much  more  fre- 
quently and  enter  the  employment 
from  which  they  eventually  retire, 
often  at  a  late  age.  An  employe  who 
entered  the  service  early  will  complete 
the  required  20,  25  or  30  years  of  serv- 
ice at  the  age  of  40,  45  or  50.  He  will 
qualify  for  retirement  while  still  a 
young  man.  The  retirement  of  the 
young  is  undesirable  from  the  point  of 
view  of  efficiency  of  service  and  un- 
necessary from  the  point  of  view  of  the 
employe  and  it  is  very  costly  because 
of  the  considerable  life  expectancy  of 
the  young.  And  on  the  other  hand  the 
man  who  entered  the  service  late  will 
qualify  for  retirement  only  at  a  late  age. 
It  is,  therefore,  more  practicable  to  fix 
a  certain  age  for  retirement  either  with- 
out any  qualification  as  to  length  of 
service  or  only  with  a  slight  qualifica- 
tion, such  as,  for  example,  a  minimum 
of  10  years  of  service  in  addition  to  the 
required  age.  Most  of  the  sound  sys- 
tems of  to-day  follow  this  practice. 
The  ages  fixed  by  the  New  York  City 
System  are  suggestive  of  a  good  age 
arrangement:  laborers  58,  mechanics 
59,  clerks  60.  For  policemen  and  fire- 
men age  57  was  proposed. 

14.  Ordinary  Disability.  —  Retire- 
ment for  ordinary  disability  should  be 
allowed  irrespective  of  the  age  of  the 
employe  and  after  a  comparatively 
short  period  of  service.  The  scale  of 
benefits  should  be  so  fixed  as  to  provide 
benefits  which  would  in  all  cases  be 
adequate  and  yet  not  as  large  as 
the  benefits  which  he  would  receive  if 
he  continued  in  the  service  until  super- 
annuation. Impartial  and  expert  medi- 
cal examination  prior  to  the  granting 
of  retirement  as  well  as  periodical  re- 
examinations after  retirement  should 
be  assured  and,  in  case  disability  is 
found  to  have  reduced  or  altogether 
ceased,  the  reduction  or  discontinuance 


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PENSIONS  IN  PUBLIC   EMPLOYMENT 


111 


of  the  allowance  and  restoration  of  the 
employe  to  service  should  be  made 
possible. 

15.  Disability  in  Performance  of 
Duty. — 'Retirement  for  disability  in- 
curred in  performance  of  duty  should 
be  allowed  irrespective  of  the  length 
of  service.  It  should  be  compensated 
by  the  employing  body,  more  liberally 
than  ordinary  disability  or  super- 
annuation, since  the  responsibility  for 
the  disability  rests  principally  upon  the 
service.  Its  "pension"  part  should  be 
paid  from  a  special  fund,  as  it  represents 
a  special  hazard.  Strict  safeguards, 
such  as  are  mentioned  in  the  preceding 
section  and  others,  must  be  provided 
to  prevent  abuse.  Where  an  employe 
is  also  covered  by  a  workmen's  compen- 
sation act,  choice  should  be  allowed 
him  between  the  benefit  under  one  or 
the  other  system. 

16.  Ordinary  Death. — In  case  of 
ordinary  death  the  employe's  contribu- 
tion together  with  compound  interest 
shouldbe  returnedto  his  legal  represent- 
atives. An  additional  death  benefit 
to  the  widow  or  the  children  of  a  lump 
sum  equal  to  one  or  two  years'  salary 
and  provided  either  entirely  at  the 
expense  of  the  employing  body  or 
jointly  with  the  employe  is  desirable. 

A  refund  of  contributions  is  a  mini- 
mum of  what  should  be  done  in  a 
sound  system.  An  additional  benefit 
adds  much  to  the  attractiveness  of  the 
system.  The  New  York  City  Municipal 
System  provides  such  an  additional 
death  benefit,  fixing  it  at  one  half  of  a 
year's  salary.  San  Francisco  does  like- 
wise. Chicago  and  Milwaukee  go  still 
further  in  this  matter  and  provide  con- 
siderable annuities  to  the  widow. 

17.  Death  Caused  in  Performance  of 
Duty. — In  case  of  death  caused  in 
performance  of  duty  the  payment  of 
an  adequate  pension  to  the  depend- 
ents in  addition  to  the  payment  of  the 


employe's  own  accumulation  (or  an 
annuity  provided  thereby)  is  advisable, 
as  the  responsibility  for  the  death  rests 
upon  the  service.  The  pension  should 
be  paid  by  the  employing  body  from 
the  same  fund  from  which  the  pension 
for  disability  in  performance  of  duty 
is  paid. 

These  principles  are  supported  by 
the  features  of  most  of  the  sound  sys- 
tems. In  the  system  of  New  York 
State  and  New  York  City  the  widow 
and  children  are  allowed  a  pension  of 
half  pay  in  addition  to  a  refund  of  the 
contributions  of  the  deceased. 

18.  Resignation  and  Dismissals. — In 
case  of  resignation  or  dismissal  the 
employe's  contributions  with  com- 
pound interest  should  be  refunded  to 
him. 

The  benefit  required  in  this  state- 
ment is  a  minimum  of  what  should  be 
done.  Some  systems  have  gone  beyond 
this  and  provide  also  for  a  refund  or 
credit,  for  annuity  purposes,  of  all 
or  part  of  the  employer's  contribution 
made  toward  superannuation  with  in- 
terest after  a  certain  length  of  service." 

19.  The  inclusion  of  optional  bene- 
fits is  highly  desirable,  because  it  increases 
the  elasticity  of  the  system  and  makes  the 
benefits  more  adaptable  to  individual 
conditions. — Most  of  the  sound  systems 
allow  the  member  at  the  time  of  retire- 
ment to  choose  to  take  a  smaller  allow- 
ance with  the  proviso  that  a  balance  of 
his  reserve  or  a  similar  allowance  or  a 
half  of  that  allowance  shall  be  paid  to 
his  dependents  after  death.  A  person 
who  has  no  dependents  will  not  avail 
himself  of  this  option  and  will  take  his 
entire  allowance.  But  a  person  with 
dependents  will  avail  himself  of  it  and 
will  find  it  of  considerable  comfort. 

'See  New  York  City,  Chicago  and  Milwau- 
kee systems.     Ch.  VII. 


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CHAPTER  V 
ESTABLISHMENT,  ADMINISTRATION  AND   MEMBERSHIP 


20.  Establishment  of  the  System. — ^To 
avoid  delay  due  to  apathy  of  public 
officials  and  employes,  the  establish- 
ment of  the  retirement  systems  should 
be  made,  wherever  possible,  man- 
datory. Where,  especially  in  cases  of 
counties  and  municipalities,  a  pro- 
vision of  such  nature  would  be  too 
drastic,  the  establishment  can  be  made 
optional.  In  such  case  an  equitable 
participation  should  be  assured  to  the 
employing  body  and  the  employes  in 
the  determination  of  whether  or  not 
the  retirement  system  should  be  estab- 
lished at  the  time.  And  proper 
actuarial  and  other  information  as  to 
the  burdens  involved  for  each  side 
should  be  presented  to  them  before  the 
system  is  finally  established. 

Little  need  to  be  added  here.  The 
provision  in  the  proposed  New  Jersey 
municipal  plan  may  illustrate  the  sug- 
gested practice.  It  is  provided  there 
that  in  case  two  thirds  of  the  employes 
of  any  department  of  any  municipality 
not  now  having  a  pension  fund  shall  at 
any  time  signify  in  writing  their  desire 
for  the  establishment  of  a  retirement 
system,  then  the  governing  body  of 
the  municipality  shall  secure  an  actu- 
arial estimate  of  the  liabilities  involved 
in  such  system,  publish  the  estimate, 
submit  the  question  as  to  the  desir- 
ability of  the  establishment  of  the  sys- 
tem to  a  referendum  vote  at  the  next 
election,  and  if  the  majority  votes  in 
the  affirmative,  establish  the  system. 
A  similar  practice  is  to  be  followed 
in  case  of  the  extension  of  the  system 
to  other  departments.  The  provision 
proposed  in  New  York  (see  Ch.  VIII)  is 
illustrative  of  a  more  radical  procedure. 

21.  Membership, — Membership  in 
the  system  should  be  made  compulsory 
for  all  new  entrants.  In  case  of 
employes  already  in  the  service  at  the 


time  of  establishment  of  the  system 
one  of  the  following  solutions  may  be 
adopted,  according  to  circumstances: 

1.  Membership  can  be  made  com- 
pulsory for  them. 

2.  It  can  be  made  optional  by  allow- 
ing the  employes  a  certain  time  within 
which  to  file  a  notification  that  they 
do  not  want  to  become  members,  and 
making  members  all  those  who  did  not 
file  the  notification. 

3.  It  can  be  made  optional  by  allow- 
ing the  employes  a  certain  time  within 
which  to  file  an  application  to  become 
a  member,  and  making  members  only 
those  who  filed  the  application. 

22.  Administration. — The  adminis- 
tration of  the  system  should  be  vested 
in  (1)  a  board  of  trustees  consisting  of 
representatives  of  the  employing  body 
and  elected  representatives  of  the  mem- 
bership of  the  system  and  (2)  an  ex- 
ecutive director.  The  representation 
in  the  board  should  be  preferably  equal 
between  the  two  sides  and  be  supple- 
mented by  a  neutral  member  of  high 
standing.  But  where  public  moneys 
are  involved  to  a  far  greater  extent 
than  the  employe's  contributions  a 
slight  preponderance  to  the  employ- 
ing side  in  the  matter  of  representation 
may  be  advisable.  Too  much  em- 
phasis cannot  be  placed  on  the  fact 
that  the  duty  of  the  board  should  be 
primarily  policy  determining  and  that 
the  director  should  have  a  broad  scope 
of  power  and  be  a  man  thoroughly 
in  sympathy  with  the  fundamental 
principles  of  the  system.  Proper 
actuarial  assistance  to  the  board  should 
be  provided. 

The  principle  of  representation  of 
the  employes  on  the  board  of  manage- 
ment of  the  pension  fund  is  recognized 
in  most  of  the  sound  pension  systems. 
Among  the  few  exceptions  to  this  rule 
are  the  systems  of  the  New  York  State 
employes   and   the   New   York   City 


1922] 


PENSIONS  IN  PUBLIC  EMPLOYMENT 


113 


employes,  where  the  management  is 
entirely  in  the  hands  of  the  employing 
body.  Among  the  arguments  in  favor 
of  such  representation,  two  may  be 
mentioned:  (1)  It  is  only  proper  that 
persons  who  contribute  money  should 
exercise  a  voice  over  the  usage  made 
of  these  monies  and  (2)  the  interest  of 
the  employes  in  a  retirement  system  is 
bound  to  be  stimulated  by  such  repre- 
sentatives. Important  is  the  emphasis 
which  the  committee  places  on  the  high 
qualifications  which  the  management 
of  the  system  must  possess.  For  the 
soundness  of  the  system  depends  on 
good  management  just  as  much  as  it 
does  on  the  scientific  planning  of  the 
system.  It  is  futile  to  write  a  good 
pension  law  if  its  enforcement  is  to  be 
vested  as  it  is  often  done,  in  the  hands 
of  men  who  belong  to  the  old  pension 
school  and  who  disapprove  of  the 
scientific  methods  of  operations  pre- 
scribed by  the  law. 

23.  Periodical  Actuarial  Valuations. 
— The  retirement  system  should  be 
periodically  valued  by  an  actuary,  so 
that  the  true  mortality  and  withdrawal 
experience  of  the  particular  service 
could  be  obtained  and  any  changes  in  it 
registered,  the  adequacy  of  the  funds 
ascertained  and  timely  adjustments  in 
the   contributions    or   benefits   made. 

The  only  point  open  to  controversy 
here  is  whether  or  not  the  contributions 
of  the  employes  (and  their  purchasing 
power  or  annuity  values)  should  also  be 
adjusted  from  time  to  time,  just  as 
those  of  the  employing  body,  according 
to  changes  in  the  mortality,  etc.,  or  not. 
The  committee  holds  that  it  is  to  the 
advantage  of  the  employes  that  such 
adjustments  should  be  made  and  that 
the  mutual  features  of  the  system  are 
thereby  strengthened. 

24.  Central  Technical  Advice. — The 
establishment  of  some  central  technical 
agency  in  the  state  to  help  the  sound 


operation  of  the  various  retirement 
systems  is  desirable.  This  agency 
established  as  a  separate  department 
or  incorporated  in  the  state  insurance 
department  could  receive  from  the 
various  funds  reports  of  their  operation, 
develop  the  true  mortality  and  with- 
drawal experience  of  the  various 
branches  of  the  public  service  in  the 
state  which  is  necessary  for  the  sound 
operation  of  the  systems,  supply  tech- 
nical information,  value  such  retire- 
ment funds  and  also  operate  for  such 
small  funds  as  cannot  lead  an  entirely 
independent  financial  existence,  some 
system  of  reinsurance. 

It  does  not  suffice  to  place  a  law 
establishing  a  sound  state  pension 
policy  on  the  statute  books.  It  is 
necessary  to  assure  that  the  huge  com- 
plicated system  created  thereby  should 
properly  operate  and  harmoniously 
develop.  For  this  purpose,  a  central 
supervisory  agency  is  suggested.  This 
proposal  is  outlined  in  detail  in  a 
bill  introduced  in  New  Jersey  and  is 
described  as  follows: 

To  protect  the  small  funds  against  any  unfore- 
seen heavy  hazards,  the  proposed  bill  requires  all 
funds  having  less  than  one  hundred  members  to 
reinsure  themselves  in  the  Reinsurance  Fund, 
which  will  be  specially  created  for  this  purpose 
under  the  supervisioH  of  the  state.  This  feature 
is  similar  to  the  reinsurance  feature  now  operat- 
ing in  some  states  in  connection  with  the  Em- 
ployers' Liability  Law. 

All  the  funds  will  operate  under  the  supervision 
ot  the  State  Pension  Committee,  which  will  pre- 
scribe standards  of  solvency,  interpret  the  law, 
examine  the  operation  of  the  funds  and  take  care 
that  a  uniform  and  sound  pension  policy  in  this 
state  is  preserved  and  due  improvements  in  the 
funds  introduced.  The  funds  will  be  valued  by 
an  actuary  approved  by  the  State  Pension  Com- 
mission, so  that  their  financial  condition  will  at 
all  times  be  known  and  their  solvency  maintained. 
In  a  word,  the  State  Pension  Commission  will 
function  with  respect  to  pension  funds  in  a  simi- 
lar manner  as  a  state  insurance  department  func- 
tions with  respect  to  insurance  companies  and 
fraternal  organizations.  Just  as  the  insurance 
departments  have  greatly  helped  to  stabilize  the 
insurance  affairs  in  every  state  in  which  they 
have  been  established,  so  will  a  state  pension  de- 
partment stabilize  pension  affairs.  Sooner  or 
later  every  state  in  which  pension  funds  operate 
must  adopt  some  scheme  of  central  supervision, 
for  the  present  pension  chaos  cannot  be  long  en- 
dured; it  threatens  with  disaster. 


114 


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[April 


A  similar  proposal  has  been  recently 
made  by  the  New  York  State  Recon- 
struction Commission,  which  urged  in 
its  report  the  establishment  in  the 
executive  department  in  the  proposed 
bureau  of  administration  of  a  special 
pension  division  composed  of  an  expert 
pension  and  actuarial  staff  which  would 
perform  the  following  functions  with 
respect  to  state,  county,  and  municipal 
pensions:  Supply  information  to  the 


legislature,  and  local  authorities,  col- 
lect pensions,  make  actuarial  valuation 
of  funds  and  calculate  rates  of  contribu- 
tions, prepare  annual  reports  on  the 
pension  situation  and  ultimately  super- 
vise the  operation  of  state  and  local 
funds  with  a  view  to  enforce  sound 
standards.  The  Illinois  Pension  Com- 
mission has  also  incorporated  in  its 
bill  the  same  thought. 


CHAPTER  VI 
TREATMENT   OF   UNSOUND   SYSTEMS 


25.  Check  on  Unsound  Legislation. — 
There  should  be  no  further  enactments 
of  retirement  projects  which  are  not 
founded  upon  an  actuarial  basis  and 
which  are  in  discord  with  the  main 
provisions  of  the  sound  policy  adopted. 

The  principle  suggested  here  cannot 
be  enacted  into  law,  as  one  legislature 
cannot  bind  another.  But  its  adop- 
tion by  each  legislature  as  a  guiding 
thought  and  sound  though  not 
statutory  rule  is  within  the  bounds 
of  possibility.  If  a  few  fundamental 
laws  covering  the  entire  public  service 
are  enacted  and  such  central  agency 
as  suggested  is  established,  this  prac- 
tice would  be  a  natural  development. 

26.  Preventing  Establishment  of  New 
Unsound  Funds. — The  establishment 
of  new  pension  funds  under  the  un- 
sound laws  which  had  not  been  repealed 
should  be  prohibited.  All  new  funds 
should  be  established  under  the  new 
law. 

27.  Reorganizing  Existing  Unsound 
Funds. — ^The  existing  unsound  pension 
funds  should  be  reorganized  or  abol- 
ished.    This  may  be  accomplished  by 


different  methods,  each  possessing 
certain  advantages,  which  are  sub- 
stantially as  follows: 

1.  The  law  may  be  amended  so  as  to 
correct  the  most  flagrant  defects  of  the 
fund  and  gradually  bring  it  into  con- 
formity with  the  requirements  of  a 
sound  policy,  or 

2.  Provision  may  be  made  inducing 
the  members  of  the  unsound  fund 
voluntarily  to  transfer  to  the  new 
sound  fund  and  compelling  all  new 
employes  to  belong  to  the  latter,  so 
that  gradually  the  old  fund  would  be 
liquidated,   or 

3.  The  old  fund  may  at  once  be 
abolished,  in  view  of  its  unsoundness, 
and  all  its  members  transferred  to  the 
new  fund  established  under  the  new  law. 

In  no  case  upon  liquidation  of  an 
old  retirement  system  should  there  be 
any  reduction  in  the  pensions  already 
granted  at  the  time  of  establishment 
of  the  new  system.  If  no  sufficient 
funds  for  their  payment  are  left  from 
the  old  system,  the  employing  body 
should  make  the  necessary  additional 
appropriations  from  year  to  year  as 
long  as  the  pensioners  live. 


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PENSIONS  IN  PUBLIC  EMPLOYMENT 


115 


CHAPTER  VII 
SOUND    SYSTEMS   IN   OPERATION 


Leaving  aside  the  sound  retirement 
systems  for  teachers,  which  are  treated 
fully  in  other  works,  there  are  seven 
systems  which  need  be  described  here. 
These  are  the  state  system  of  Massa- 
chusetts,— the  earliest  sound  system  in 
this  country,  established  in  1911,  that 
of  New  York,  enacted  in  1920,  and  that 
of  New  Jersey  in  1921 ;  and  the  munici- 
pal system  of  New  York,  operating 
since  1920,  that  of  Chicago  and  that  of 
San  Francisco,  established  in  1922, 
and  that  of  Milwaukee  which  became 
also  effective  in  the  latter  year,  but  so 
far  only  in  application  to  policemen. 

There  is  still  one  more  system — the 
permissive  act  of  Massachusetts  apply- 
ing to  municipalities.  It  is,  however, 
practically  identical  with  the  state  sys- 
tem and  furthermore  only  one  city, 
that  of  Salem,  apparently  took  advan- 
tage of  it.  It  need  not,  therefore,  be 
discussed  separately. 

The  retirement  system  for  federal 
employes,  though  only  recently  estab- 
lished (1920)  cannot  be  discussed  here. 
It  does  not  belong  to  the  class  of  sound 
systems,  for  practically  the  only  sound 
featiu-e  in  it  is  that  which  provides 
for  an  actuarial  board  to  make  valu- 
ations of  the  system. 

Of  the  seven  systems  mentioned, 
three — those  of  Massachusetts,  Chicago 
and  Milwaukee — are  based  on  contri- 
butions of  the  same  percentage  rate  for 
entrants  of  all  ages  and  provide  just 
what  the  accumulation  from  the  con- 
tributions of  the  employees  and  the 
employing  body  will  pro\'ide.  Three 
systems, — those  of  New  York  State, 
New  York  City  and  New  Jersey  gradu- 
ate the  rate  of  contributions  according 
to  entrance  age  and  are  mixed  systems 
on  one  hand  gi\ang  the  employe  an 
equivalent  of  his  accumulations,  on  the 


other  guaranteeing  him  from  the  con- 
tributions of  the  employing  body  a 
pension  of  a  certain  proportion  of  salary 
for  each  year  of  service.  The  San 
Francisco  system  stands  in  between 
these  two  groups,  fixing  the  regular 
pension  according  to  accumulations 
from  the  contributions  of  the  employ- 
ing body,  as  the  systems  in  the  first 
group  do,  while  on  the  other  hand  grad- 
uating the  rates  of  contributions  and 
fixing  the  prior  service  pensions  as  a 
certain  proportion  of  salary,  as  it  is 
done  by  the  systems  in  the  second 
group. 

1.  Massachusetts  State  Employes 
The  retirement  system  covering  the  Massa- 
chusetts State  Employes  was  established  under 
the  act  of  1911.  It  covers  practically  the  entire 
service  and  calls  for  contributions  from  both  the 
state  and  the  employes,  whereas  formerly  only 
certain  branches  of  the  service  were  covered 
and  no  contributions  from  the  employes  were 
exacted.  Membership  in  the  system  is  compul- 
sory for  new  entrants  and  optional  for  those  in 
the  service  at  the  time  the  system  was  established. 
The  employes  in  the  service  prior  to  June  1, 
1918,  are  requu-ed  to  contribute  3  per  cent  and 
are  allowed  to  contribute  up  to  5  per  cent. 
Those  employed  since  that  date  are  required  to 
contribute  5  per  cent.  No  one  is  allowed  to  con- 
tribute more  than  on  the  basis  of  a  salary  of  $30 
per  week  ($1,560  per  year).  This  contribution  is 
credited  to  the  employes  account  with  interest 
at  3  per  cent  and  provides  for  him  at  retirement 
an  annuity'  according  to  his  age  and  on  the  basis 
of  the  American  Experience  Mortality  Table. 
The  state  provides  a  pension  equal  to  the  annuity 
and  in  case  of  men  who  have  prior  service  (prior 
to  June  1,  1912)  an  extra  pension  as  large  as  the 
double  of  his  contribution  paid  throughout 
would  have  constituted.  In  other  words,  both 
his  annuity  and  pension  for  the  prior  service  are 
made  up  at  the  expense  of  the  state,  and  there  is 
a  further  provision  by  which  the  total  allowance 
must  in  no  case  be  less  than  $300  per  year  nor 
more  than  half  pay. 


116 


NATIONAL  MUNICIPAL  REVIEW 


[April 


Retirement  is  allowed  at  the  age  of  60,  pro- 
vided the  employe  had  15  years  of  service,  or  at 
the  age  of  70  irrespective  of  service,  or  after  35 
years  of  service  irrespective  of  age;  or  in  case  of 
disability  after  15  years  of  service.  In  case  of 
withdrawal  from  the  service  through  resignation 
or  dismissal,  or  in  case  of  death  before  retirement, 
the  employe  or  his  dependents  are  entitled  to 
his  contributions  with  regular  interest. 

The  administration  of  the  system  is  in  the 
hands  of  a  board  composed  of  the  state  treasurer, 
a  person  elected  by  the  members  of  the  system 
and  a  third  person  selected  by  the  two. 

2.  New  Jersey  State  Employes 
The  law  establishing  this  system  was  enacted 
in  1921.  It  covers  the  entire  state  service. 
Membership  in  it  is  compulsory  with  new 
entrants  and  optional  with  present  employes 
and  is  divided  into  two  large  groups,  laborers 
and  clerks,  with  f lu-ther  sub-division  according  to 
sex. 

Retirement  is  allowed  at  60  and  is  covered  by 
a  retireaient  allowance  of  approximately  7*^ 
of  the  average  salary  of  the  last  five  years  for 
each  year  of  service.  It  consists  of  an  annuity 
such  as  the  employes'  contributions  will  provide 
and  amounting  at  the  above  age  to  one  half  of  the 
foregoing  fraction  in  case  of  average  advance- 
ment of  salary  for  all  future  service,  and  of  a  pen- 
sion from  the  state  furnishing  the  other  half  for 
future  service  and  the  whole  fraction  for  the 
prior  service. 

Ordinary  disability  is  recognized  for  retire- 
ment after  10  years  of  service  and  the  allowance 
is  composed  of  a  pension  of  20  per  cent  of  salary 
plus  the  annuity  with  a  proviso  that  the  total 
must  not  exceed  90  per  cent  of  the  allowance 
which  the  employe  would  have  received  had  he 
continued  in  the  service  to  the  age  of  60.  Acci- 
dental disability  is  covered  by  a  pension  of 
two  thirds  of  the  salary  plus  the  annuity  and 
accidental  death  by  a  pension  to  the  widow  or 
children  of  half  pay  plus  a  refund  of  his  con- 
tribution with  interest. 

In  case  of  resignation,  dismissal  or  ordinary 
death  the  contributions  of  the  employe  are 
refunded  to  him  with  interest.  The  usual 
optional  benefits  are  provided  on  retirement. 

The  members  are  to  contribute  according  to 
their  age,  sex  and  occupation  as  follows: 

Clerks,  men,  from  4.06%  to  7.15%  of  salary 
Clerks,  women,  from  4.35%  to  7.84%  of  salary 
Laborers,  men,  from  3.53%  to  7.07%  of  salary 


Laborers,  women,  from  3.65%  to  7.38%  of 

salary 

The  state  is  to  contribute  from  2  to  2^  per 
cent  of  salary  on  account  of  future  service,  and 
in  addition  discharge  on  a  reserve  basis  in  the 
course  of  25  years  all  accrued  liabilities. 

The  system  is  to  be  managed  by  a  board  con- 
sisting of  two  trustees  to  be  appointed  by  the 
governor,  two  elected  by  the  members  and  the 
state  treasurer. 

3.  New  York  State  Employes 
This   system   was   established   imder   a   law 
enacted  in  1920.     It  covers  all  employes  except 
those  covered  by  existing  pension  laws  such  as 
hospital  employes. 

Membership  in  it  is  compulsory  for  all  new 
entrants  and  optional  with  present  employes  and 
is  divided  into  five  groups:  male  clerical,  admin- 
istrative, professional  and  technical;  female 
clerical,  etc.;  mechanics  and  laborers;  male 
employes  of  state  institutions;  female  employes 
of  state  institutions. 

The  conditions  of  retirement  and  scale  of 
benefits  is  the  same  as  that  of  the  New  Jersey 
system. 

Disability  is  recognized  after  15  years  of  serv- 
ice and  is  covered  by  an  allowance  of  90  per 
cent  of  the  superannuation  scale  with  a  minimum 
of  25  per  cent  of  salary,  the  pension  from  the 
state  supplying  the  difference  between  the 
annuity  and  the  allowance.  No  special  provi- 
sion is  made  for  disability  in  performance  of  duty 
or  for  death  in  performance  of  duty.  In  case  of 
resignation,  dismissal  or  death,  the  contribu- 
tions of  the  employe  are  returned  with  interest. 
Optional  benefits  are  offered  on  retirement;  and 
proper  safeguards  are  provided  against  abuse  of 
disability  retirement. 

The  employes  contribute  according  to  their  age 
and  group  such  a  rate  as  would  provide  in  case 
of  average  advancement  the  proportion  of  the 
benefits  mentioned.     The  rate  ranges  as  follows: 
Male,  clerical,  from  4.29%  to  7.24% 
Female,  clerical,  from  4.83%  to  8.13% 
Male,  institutional,  from  3.84%  to  7.24% 
Female,  institutional,  from  4.32%  to  8.13% 
Laborers,  from  3.42%  to  7.07% 
The  state  will  contribute  1.15  per  cent  for 
future  service  and  2.37  per  cent  for  prior  service. 
The  latter  contribution  will  have  to  be  made 
only  for  about  30  years. 

The  system  will  be  managed  bv  the  state 
comptroller. 


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PENSIONS  IN  PUBLIC  EMPLOYIVIENT 


117 


4.  New  York  City  Municipal  Employes 

The  New  York  City  Employes'  Retirement 
System  was  established  under  a  law  enacted  in 
1920.  It  covers  all  municipal  employes  not 
covered  by  the  various  special  departmental 
funds,  such  as  those  of  the  police,  fire,  teachers. 
Hunters  College,  street  cleaners  and  department 
of  health. 

Membership  in  the  system  is  compulsory  for  all 
new  entrants  and  optional  for  present  employes 
and  is  divided  into  the  following  three  groups: 
laborers  and  unskilled  manual  workers;  me- 
chanics and  skilled  workers  engaged  upon  duties 
requiring  principally  physical  exertion;  and 
clerical,  administrative,  professional  and  tech- 
nical workers. 

Retirement  is  optional  for  the  first  group  at 
the  age  of  58,  for  the  second  at  59  and  for  the 
third  at  60,  and  is  compulsory  for  all  at  70.  The 
retirement  allowance  will  average  ^V  of  the 
average  salary  of  the  last  ten  years  for  the  first 
group,  -g^  for  the  second  and  y^  for  the 
third.  In  other  words,  approximately  half  pay 
would  be  provided  in  the  first  case  after  33  years, 
in  the  second  after  34  and  in  the  third  after  35. 
The  allowance  consists  of  such  annuity  as  the 
contributions  of  members  will  purchase  and 
which  in  the  average  case  at  the  retiring  age  will 
amount  to  one  half  of  the  fractions  just  mentioned 
for  all  future  service;  and  of  a  pension  provided 
by  the  city  and  constituting  the  other  half  of 
these  fractions  for  all  subsequent  service  and  the 
whole  of  them  for  all  prior  service. 

The  benefit  for  ordinary  disability  is  granted 
after  10  years  of  service  and  is  somewhat  com- 
plicated. In  addition  to  the  annuity  of  such 
amount  as  the  employes'  contributions  will 
provide  at  the  time  of  retirement,  a  pension  is 
given  which  will  bring  the  total  allowance  up  to 
90  per  cent  of  the  ^\,  ^'^  and  ^V  fractions; 
if  the  allowance  so  produced  is  less  than  25  per 
cent  of  salary  then  additional  salary  fractions 
will  be  provided  for  each  year  which  separates  the 
employe  from  his  regular  retirement,  not  to  ex- 
ceed, however,  25  per  cent  of  salary. 

Allowances  for  disability  in  performance  of 
duty  are  granted  any  time  and  consist  in 
addition  to  the  aimuity,  of  a  pension  of  three 
fourths  pay.  Various  safeguards  are  provided 
for  the  re-examination  and  restoration  to  service 
of  retired  men  whose  disability  has  ceased.  In 
case  of  ordinary  death  the  contributions  of  the 
employe  with  compound  interest  are  refunded  to 
the  legal  representatives  of  the  deceased  and 


in  addition  a  lump-sum  benefit  of  one  half  of 
the  year's  salary  is  given.  In  case  of  death  in 
performance  of  duty  a  pension  of  half  pay  is 
provided  to  the  dependents  in  addition  to  a 
refund  of  the  contributions  of  the  deceased  with 
compound  interest. 

The  employe  who  resigns  or  is  dismissed 
before  retirement  receives  his  contributions  with 
interest.  In  addition  the  dismissed  employe 
receives  a  refund  of  the  employer's  contribu- 
tions figiu-ed  as  the  present  value  of  a  pension, 
deferred  to  age  60,  of  y^^y  of  his  salary  for  each 
year  of  his  service.  Various  optional  benefits 
which  are  offered  in  the  best  systems  are  allowed 
on  retirement.  The  system  is  managed  by  the 
board  of  estimate  and  apportionment. 

The  employes  contribute  according  to  their 
group,  sex  and  age,  from  about  3f  per  cent  to 
about  6  per  cent  of  salary.  The  city's  contribu- 
tion consists  of  several  elements,  each  of  which 
defrays  a  different  benefit.  It  discharges  all  its 
liabilities,  accrued  as  well  as  future,  on  a  reserve 
basis. 

5.   Milwaukee 

This  system  was  established  under  an  act  of 
1921.  The  act  provided  for  the  establishment  of 
a  general  city  system  covering  all  the  departments, 
but  it  made  its  establishment  contingent  on  the 
approval  by  the  common  council  of  the  city.  For 
more  than  a  year  the  council  withheld  its  approval 
because  of  the  great  costs  which  the  city  would 
have  to  bear  under  the  system.  Finally,  in  1922, 
it  approved  the  application  of  the  law  to  the 
policemen,  but  refused  to  apply  it  to  the  other 
groups  of  employes.  Thus  the  act  became  only 
partly  affective. 

The  law  contemplates  the  establishment  of 
four  funds,  three  to  cover  the  teachers,  policemen 
and  firemen  and  the  fourth  all  others.  Each 
fund  is  to  be  managed  by  a  board  composed  of 
three  representatives  of  the  employes  and  two 
of  the  city;  and  a  central  commission  is  to  super- 
vise them  all.  Unlike  in  the  Massachusetts 
and  other  systems,  the  employing  body  is  to 
contribute  a  much  greater  share  of  cost  than 
the  employe  and  the  contribution  of  the  latter 
consists  of  several  elements.  For  superannua- 
tion the  employe  is  to  contribute  3  per  cent  of  his 
salary  and  the  city  9  per  cent  in  case  of  a  police- 
man or  fireman  and  6  per  cent  in  case  of  others. 
For  annuities  to  widows  in  case  of  ordinary  death 
the  employe  is  to  pay  1  per  cent  and  the  city  2? 
per  cent  and  2  per  cent  for  the  uniformed  and  un- 
uniformed  classes  respectively.     Ordinary  dis- 


118 


NATIONAL  MUNICIPAL  REVIEW 


[April 


ability  is  to  be  covered  by  a  contribution  of  one- 
half  per  cent  each  from  the  employe  and  from  the 
city,  and  administrative  expenses  by  one  eighth 
of  a  per  cent  from  each.  Disability  and  death  in 
performance  of  duty  and  children's  benefits  are  to 
be  paid  entirely  by  the  city. 

To  summarize,  men  would  contribute  about 
4.6  per  cent  and  women  3.6  per  cent  while  the  city 
would  pay  13.75  per  cent  for  policemen  and 
firemen,  9.75  per  cent  for  other  male  employes 
and  7.50  per  cent  for  women,  in  addition  to  acci- 
dent and  children's  benefits,  pensions  granted 
under  the  old  laws  and  contributions,  at  the  rate 
of  9  and  6  per  cent,  for  all  prior  years  of  service 
of  its  present  employes,  with  compound  interest. 
These  past  contributions,  estimated  at  almost 
$9,000,000,  are  to  be  raised  by  means  of  equal 
annual  instalments  during  a  period  of  40  years. 
The  obligation  under  the  existing  pension  roll 
is  also  to  be  liquidated  by  means  of  equal  annual 
instalments  during  the  same  period.  It  would 
appear  that  the  total  contributions  of  the  city  on 
account  of  all  the  items  would  exceed  in  the  police 
and  fire  funds  20  per  cent  of  the  payroll  during 
the  initial  period. 

Retirement  is  allowed  on  superannuation  at 
the  age  of  57  for  policemen  and  firemen  and  at 
65  for  other  employes,  provided  the  employe  has 
rendered  15  years  of  service;  or  before  that  time 
in  case  of  ordinary  or  accidental  disability.  The 
benefits  are  as  follows :  In  case  of  superannuation 
an  annuity  of  such  amount  as  the  accumula- 
tions will  provide;  in  case  of  ordinary  disability 
(including  sickness  of  more  than  15  days'  dura- 
tion), an  annuity  of  half  pay  but  payable  only 
for  a  short  time,  maximum  one-fourth  of  the 
time  of  his  total  service  and  in  no  case  more  than 
five  years,  substituted  thereafter  by  such  annuity 
as  the  accumulations  will  provide;  and  in  case 
of  accidental  disability  an  annuity  of  55  per 
cent  of  the  salary  payable  until  superannuation, 
and  substituted  then  by  an  annuity  depending 
on  the  accmnulations.  While  the  annuity  of  50 
or  55  per  cent  is  paid  the  employe  and  the  city 
continue  to  contribute  so  as  to  swell  his  eventual 
accumulations. 

The  widow  is  to  receive  an  annuity  purchased 
by  the  combined  contribution  of  3  or  3|  per 
cent.  If  the  death  occurs  before  retirement 
she  is  entitled  to  an  additional  annuity  from  the 
contributions  of  6  or  9  per  cent  made  by  and  on 
behalf  of  the  employe  for  his  regular  retirement, 
provided  that  the  total  annuity  does  not  exceed 
the  one  to  which  she  could  have  been  entitled 


had  he  lived  until  regular  retirement.  In  case 
of  death  in  performance  of  duty  the  widow  is  to 
receive  such  an  annuity  as  she  would  have 
received  had  her  husband  lived  until  regular 
retirement. 

In  case  of  resignation  or  dismissal  the  employe 
is  entitled  to  his  own  contribution  with  interest, 
and  if  he  has  rendered  10  years  of  service  or 
more  and  has  left  his  contribution  in  the  fund  he 
receives  also  a  credit  for  one-tenth  fraction  of 
the  accumulation  from  the  city's  contributions 
for  each  year  of  service  above  10  and  is  entitled 
at  superannuation  to  an  annuity  on  that  basis. 
In  other  words  an  employe  who  rendered  20  years 
of  service  will  preserve  all  his  credits,  although 
he  has  resigned  or  has  been  dismissed.  All  an- 
nuities are  computed  on  the  basis  of  the  Ameri- 
can Experience  Table. 

6.     Chicago. 

This  system  was  established  under  an  act  of 
1921  and  is  an  outgrowth  of  the  work  of  the  Illi- 
nois Pension  Laws  Commission.  It  resembles  in 
many  of  its  features  the  Milwaukee  system. 

The  fund  established  thereby  covers  all  mu- 
nicipal employees  except  policemen,  firemen  and 
teachers.  Each  employee  is  to  contribute  3^% 
of  his  salary  for  superannuation,  an  additional 
1%  for  widow's  benefits  and  two  assessments 
(equally  apportioned  among  all  members)  the 
amounts  of  which  may  vary  from  year  to  year — 
one  to  cover  one  half  of  the  cost  of  the  ordinary 
disability  benefits,  the  other  to  cover  one  half  of 
the  cost  of  administering  the  system.  The  total 
contribution  of  the  employee  will  approximate 
5%.  But  only  that  portion  of  salary  is  taken 
into  account  which  is  below  $3000. 

The  city  is  to  pay  5f%  of  salary  for  superan- 
nuation, l|%  for  widow's  benefits,  the  same  as- 
sessments for  ordinary  disability  and  adminis- 
trative expense  as  the  employees  will  pay,  the 
total  cost  of  benefits  for  disability  and  death 
caused  in  performance  of  duty  and  the  total  cost 
of  children's  annuities.  The  aggregate  of  these 
normal  contributions  will  probably  exceed  9%  of 
the  salaries.  In  addition,  the  city  will  pay  what- 
ever is  necessary  to  make  up  a  contribution  of 
8§%  of  salary  (5f  %  for  superannuation  and  2f  % 
for  widow's  benefits)  for  each  year  of  prior  serv- 
ice of  each  employee.  It  will  pay  this  contribu- 
tion not  on  the  basis  of  the  salary  actually  re- 
ceived by  the  employee  during  his  past  service, 
but  on  the  basis  of  the  salary  received  by  him  at 
the  time  of  establishment  of  the  system.     Con- 


1922] 


PENSIONS  IN  PUBLIC  EMPLOYMENT 


119 


sidering  the  large  general  increases  of  salaries 
which  have  been  made  in  recent  years  (besides 
the  ordinary  individual  advancement  in  salary) 
it  seems  likely  that  this  contribution  will  yield  to 
the  employee  perhaps  twice  as  much  as  a  similar 
contribution  made  on  the  basis  of  salaries  ac- 
tually received  by  him  would  have  yielded.  The 
city  will  also  pay  all  pensions  granted  from  the 
fund  established  under  the  act  of  1911  and  fur- 
thermore contribute  enough  to  give  every  mem- 
ber who  belonged  to  that  fund  credit  in  the  new 
fund  for  all  contributions  paid  by  him  to  the 
former,  with  4%  compound  interest. 

From  the  accumulations  built  from  these 
various  contributions  annuities  will  be  paid  to 
the  employees  on  retirement  after  55  years  of 
age,  except  that  the  employees  who  have  not 
reached  the  age  of  60  receive  the  full  benefit  of 
the  city's  contribution  only  if  they  had  20  years 
of  service  to  their  credit.  They  lose  one  tenth  of 
that  credit  for  every  year  that  their  service  falls 
short  of  twenty,  thus  receiving  after  10  years  of 
service  or  less  only  the  benefit  of  their  own 
accumulations. 

A  similar  arrangement  as  to  credit  for  the 
city's  contributions  is  followed  in  case  of  resig- 
nation, dismissal  or  death  before  55  years  of  age. 
If  the  resigning  or  dismissed  employee  does  not 
withdraw  his  monies  he  can  claim  after  reaching 
fifty-five  years  of  age,  if  he  had  more  than  10 
years  of  service,  an  annuity  not  only  from  his 
own  accumulations  but  also  from  y  q^  of  the  city's 
accimiulations  for  each  year  of  service  over  ten, 
i.  e.  from  the  full  amount  if  he  served  20  years  or 
more.  And  similarly  in  case  of  death,  the  widow 
is  entitled  to  an  annuity  not  only  from  the  accu- 
mulations of  the  deceased  but  also  from  one  tenth 
of  the  city's  accumulations  for  every  year  of 
service  of  the  deceased  in  excess  of  ten,  i.  e.  from 
the  full  amount  after  a  service  of  twenty  years. 

Ordinary  disability  benefits  are  paid  at  any 
time.  First  a  temporary  annuity  is  paid  of  half 
pay  as  in  Milwaukee.  It  is  paid  from  the  special 
assessments  mentioned  above  and  continues  for 
a  maximum  period  of  i  of  the  period  of  service 
of  the  employee  and  not  for  more  than  five  years. 
None  of  the  accumulations  credited  to  the  em- 
ployee are  used  for  this  purpose.  In  fact  the 
accumulations  continue  to  grow,  the  same  con- 
tributions being  deducted  from  his  annuity  and 
the  same  contributions  being  made  by  the  city 
as  had  been  paid  by  the  employee  and  by  the 
city  when  he  was  in  active  service.  If  at  the 
expiration  of  the  period  mentioned  the  employee 


is  still  disabled,  he  receives  the  regular  annuity 
from  his  and  the  city's  accumulations  instead  of 
the  half  pay  annuity  the  payment  of  which  then 
ceases. 

In  case  of  disability  in  performance  of  duty 
and  death  in  performance  of  duty  the  benefits 
are  paid  entirely  at  the  expense  of  the  city  until 
the  time  the  disabled  reaches  the  age  of  Q5  or,  in 
case  of  death,  until  the  time  the  deceased  would 
have  reached  that  age  had  he  lived.  They 
amount  to  75  per  cent  of  salary  in  case  of  dis- 
ability and  60  %  in  case  of  death.  While  paying 
these  benefits  the  city  also  pays  each  year  to  the 
fund  for  itself  and  for  the  employee  the  regular 
contribution  so  that  the  accumulations  of  the 
disabled  or  those  for  the  widow  of  the  deceased 
grow  just  as  if  he  was  still  in  active  service  and  in 
the  latter  case,  still  alive.  When  the  time  men- 
tioned is  reached,  this  annuity  ceases  and  instead 
the  regular  annuity  from  the  accumulations 
standing  to  the  credit  of  the  employee  or  of  the 
widow  is  paid  to  the  disabled  or  the  widow. 

In  addition  to  these  benefits  children  under  18 
years  of  age  are  paid  annuities  at  the  rate  of  $10 
a  month,  if  the  remaining  parent  is  living,  and 
$20  a  month  if  she,  too,  is  dead,  up  to  a  certain 
maximiun. 

If  the  employee  dies  before  retirement,  his 
accumulations  from  his  contributions  are  added 
to  those  made  for  the  widow's  benefit,  and  she 
receives  a  larger  annuity  but  one  not  in  excess  of 
that  which  she  would  have  received  had  he  lived 
until  55  years  of  age  and  entered  on  aimuity.  If 
the  employee  has  no  wife  at  the  time  of  retire- 
ment or  on  reaching  the  age  of  65  he  receives 
back  all  that  was  contributed  by  him  for  widow's 
purposes,  with  compoxmd  interest. 

The  benefit  provisions  of  the  system  are  quite 
complicated  and  there  are  many  features  and 
qualifications  in  it  which  cannot  be  mentioned 
here.  All  annuities  are  computed  on  the  basis  of 
the  American  Experience  Mortality  tables.  In 
other  words  no  difference  of  cost  is  recognized  as 
between  the  benefits  of  men  and  women  and  the 
same  annuities  are  paid  to  both  for  every  dollar 
of  accumulation. 

The  old  fund  established  under  the  act  of  1911 
is  merged  in  the  new.  The  city  is  to  contribute 
each  year  $600,000  to  pay  the  prior  service  an- 
nuities and  the  pensions  granted  under  the  old 
act  and  the  other  items  which  constitute  the  ac- 
crued liabilities  ©f  the  system.  This  contribu- 
tion is  to  cease  when  the  assets  accumulated 
therefrom  are  equal  to  the  prior  service  liabilities. 


120 


NATIONAL  MUNICIPAL  REVIEW 


[April 


7.     San  Francisco. 

As  the  cities  of  California  enjoy  broad  powers 
of  home  rule,  the  Legislative  procedure  estab- 
lishing this  system  was  very  different  from  that 
which  brought  the  other  systems  here  described 
into  existence.  A  committee  of  two  men,  ap- 
pointed by  the  Mayor  in  1920  drafted  an  amend- 
ment to  the  City  charter  providing  for  the  estab- 
lishment of  a  sound  retirement  system  for  the 
employees  not  covered  by  any  pension  provision, 
outlining  briefly  the  fundamentals  of  the  plan 
and  creating  an  administrative  board  whose  duty 
it  would  be  to  secure  the  necessary  actuarial  and 
other  technical  advice  and  to  evolve  the  details 
of  the  system.  After  approval  by  the  Board  of 
Supervisors  the  amendment  was  submitted  to  a 
referendum  of  the  voters  and  ratified  by  them 
and  was  presented  to  the  Legislature  which  en- 
acted it  in  January  1921.  Then  the  Adminis- 
trative Board  was  organized,  an  actuarial  inves- 
tigation undertaken  and  detailed  provision  of 
the  systems  were  evolved.  These  were  then 
submitted  to  the  Board  of  Supervisors  which 
enacted  them  as  a  city  ordinance  on  February  6, 
1922. 

The  system  covers  all  employees  of  the  city 
and  county  except  policemen,  firemen  and 
teachers.  Membership  in  the  system  is  com- 
pulsory for  present  employees  as  well  as  new  en- 
trants. The  plan  has  been  drawn  very  closely 
along  the  lines  of  the  system  for  the  New  York 
City  employees.  Retirement  is  to  take  place  on 
superannuation  at  the  age  of  62,  or  in  case  of 
completion  of  30  years  of  service,  at  the  age  of  60. 
Disability  retirements  are  allowed  any  time  after 
20  years  of  service. 

The  employee  is  to  receive  on  retirement  on 
superannuation  an  annuity  from  his  accumula- 
tions, a  pension  equal  to  the  annuity  and  an 
additional  pension  of  1|%  of  salary  for  each 
year  of  prior  service.  The  rates  of  contributions 
are  so  fixed  that  in  case  of  average  advancement 
of  salary  and  retirement  at  age  62,  the  annuity 
and  regular  pension  should  each  be  one  half  of 
the  following  salary  fractions:  1^%  for  each  year 
of  service  for  men  and  about  li%  (1.72%)  for 
women.     In  other  words  a  man  in  the  instance 


mentioned  would  obtain  a  retirement  allowance 
of  about  half  pay  after  37 1  years  of  service, 
whereas  a  woman  would  obtain  it  after  about  43 
years  of  service. 

This  disability  allowance  is  the  same  as  that 
of  the  New  York  City  system,  except  for  a  differ- 
ence in  the  salary  fraction  which  is  li%  here. 

The  employee's  accumulations  are  retiu-ned  at 
resignation,  dismissal  or  death  and  an  additional 
death  benefit  is  provided  of  one  half  of  last  year's 
salary  in  a  lump  sum.  The  usual  options  are 
allowed. 

The  contributions  of  the  employees  and  the 
city  are  graduated  according  to  age  in  such  a  way 
as  to  accumulate  in  case  of  average  advancement, 
reserves  to  age  62  that  would  provide  the  an- 
nuities and  pensions  of  the  rate  mentioned.  The 
contributions  range  from  2.87%  at  age  20  to 
6.37%  at  age  70,  for  men  and  from  2.94%  to 
6.31%  in  case  of  women.  While  there  is  there- 
fore only  a  slight  difference  between  the  contri- 
butions of  the  men  and  women  there  is  great  dif- 
ference as  already  stated  between  their  benefits. 

The  city  is  to  match  with  its  normal  contri- 
butions every  contribution  of  the  employee.  In 
other  words  the  city's  contribution  is  not  re- 
duced as  it  is  in  the  other  systems  by  the  fact  of 
lapses  of  the  city's  contributions  at  withdrav>'als 
and  deaths.  The  portion  of  the  city's  accumula- 
tion which  is  left  over  in  the  fund,  when  an  em- 
ployee withdraws  from  the  fund  or  dies,  is  applied 
to  the  liquidation  of  the  prior  service  liability 
and  other  liabilities  of  the  system.  In  addition 
the  city  is  to  contribute  on  account  of  prior 
service  at  least  $150,000  annually  or  as  much 
more  as  may  be  necessary  to  cover  the  prior 
service  payments  of  the  year,  until  the  reserves 
in  the  fund  equal  the  value  of  all  subsequent 
payments  from  the  fund. 

The  system  is  to  be  administered  by  the  Board 
of  Administration  which  is  composed  of  the 
Chairman  of  the  Finance  Committee  of  the 
Board  of  Supervisors,  the  Auditor,  three  mem- 
bers, elected  by  the  membership  of  the  sys- 
tem, and  two  citizens  appointed  by  the  Mayor, 
one  to  be  an  insurance  oflacial  and  one  a  bank 
officer. 


1922] 


PENSIONS  IN  PUBLIC  EMPLOYMENT 


121 


CHAPTER  VIII 
SOUND   PENSION   BILLS   ABOUT   TO   BECOME  LAWS 


Several  sound  pension  projects  incor- 
porated in  bill  form  are  pending  in 
various  states.  Three  of  these  have 
met  with  such  favorable  response  in 
the  Legislatures  of  their  respective 
states  that  their  enactment  seems  very- 
likely.  These  are  the  bills  applying  to 
Boston,  the  municipalities  and  counties 
of  New  York  (New  York  City,  except- 
ed) and  the  city  of  Providence.  Three 
other  bills — those  of  New  Jersey  and 
Illinois  municipalities  and  the  city  of 
Yonkers — for  some  reason  or  other 
were  less  fortunate  and  failed  to  pro- 
gress very  far,  and  one  act, — that 
applying  to  Minneapolis,  though  a  law 
has  not  been  taken  advantage  of  and 
still  belongs  to  the  realm  of  projects. 
Interesting  as  these  four  pension  plans 
are,  it  is  impossible  because  of  lack  of 
space  to  discuss  them  here.  The  reader 
is  referred  for  their  study  to  the  official 
reports  of  New  Jersey,  Illinois  and 
Yonkers  and  the  Minnesota  Act  of 
1919.  The  three  bills,  however,  which 
are  likely  to  be  enacted  will  be  de- 
scribed. 

8.    Boston. 

The  Boston  Finance  Commission  framed  a 
bill  in  1921  intended  to  establish  a  sound  retire- 
ment system  for  the  employees  not  yet  covered 
by  any  pension  law  and  gradually  extend  to  the 
entire  city  service.  It  passed  both  houses  of  the 
Legislature  but  met  with  a  hitch  before  the 
Governor  which  caused  it  to  be  laid  over  for 
another  year.  It  will  probably  be  enacted  in 
the  session  of  1922. 

The  system  will  cover  (1)  the  clerks  and  other 
employees  who  have  not  been  covered  hitherto 
by  any  pension  law  (2)  all  new  entrants  in  the 
police  and  fire  departments  and  among  the 
laborers  and  teachers  and  (3)  such  present  em- 
ployees in  the  latter  departments  and  groups  as 
choose  to  renounce  the  systems  under  which  they 
are  now  covered  and  come  into  the  new  system. 
Membership  is  optional  for  present  employees  to 


the  extent  that  any  clerk  who  does  not  want  to 
join  may  stay  away  by  filing  a  notification  that 
he  does  not  want  to  become  a  member  and  any 
employee  covered  by  another  pension  act  may  if 
he  wishes  to  change  to  this  system  under  condi- 
tions described.  For  all  new  entrants  member- 
ship is  compulsory. 

Retirement  is  permitted  anytime  after  reach- 
ing the  age  of  sixty  years  or  in  case  of  disability 
before,  a  minimum  of  ten  years  of  service,  how- 
ever, being  required  in  case  of  ordinary  disability. 
The  members  are  to  contribute  4  per  cent  of  their 
salary  which  is  to  provide  an  annuity  in  accord- 
ance with  the  tables  of  mortality  which  have  been 
prepared  for  the  various  occupational  groups. 
The  city  is  to  provide  a  pension  of  an  equivalent 
amount  and  also  to  make  up  with  compound  in- 
terest the  contributions  on  its  own  account  as  well 
as  on  behalf  of  the  employee  for  all  years  of  prior 
service  at  the  rate  of  4  per  cent  of  salary  received 
by  the  employee  in  the  past  and  provide  an  addi- 
tional pension  from  accumulations  thus  obtained. 
The  total  pension  part  is  not  to  exceed  in  any 
case  half  pay.  For  cases  of  ordinary  disability 
the  pension  part  is  to  be  increased  to  such  an 
amount  as  would  have  been  provided  had  the 
employee  continued  at  the  same  salary  in  the 
service  until  the  age  of  sixty.  Liberal  accidental 
disability  and  accidental  death  benefits  are  pro- 
vided and  the  contributions  of  the  employees 
together  with  interest  at  4%  are  to  be  re- 
funded in  cases  of  resignation,  dismissal  or 
ordinary  death.  The  same  options  as  in  other 
systems  are  offered.  The  system  is  to  operate  on 
a  full  reserve  basis  with  the  accrued  liabilities  to 
be  discharged  in  the  course  of  about  25  years. 
The  obstacle  that  arose  in  1921  was  caused  by 
the  objections  of  the  Police  Commissioner  who 
demanded  that  the  policemen  be  altogether  ex- 
cluded from  the  operation  of  the  system.  The 
Governor  sent  a  word  to  the  Legislature  request- 
ing it  to  reconsider  the  measure  and  eliminate 
the  policemen  but  the  sponsors  of  the  measure 
felt  that  to  exclude  the  latter  woidd  be  a  mis- 
take. Before  an  agreement  could  have  been 
obtained,  the  session  ended. 

This  year  (1922)  the  bill  is  again  before  the 
Legislatiure.  It  includes  the  policemen  as  it  did 
the  year  before  and  it  also  includes  the  teachers 


122 


NATIONAL  MUNICIPAL  REVIEW 


[April 


whom  the  authors  of  the  measure  did  not  include 
in  1921.  The  school  committee  and  a  large  por- 
tion of  the  teachers,  mainly  the  men  and  higher 
paid  group  for  whom  the  present  system  is  entirely 
inadequate,  urged  upon  the  Finance  Commission 
the  inclusion  of  the  teachers. 

The  city  will  pay  a  normal  contribution  which 
will  supply  the  pensions  equal  to  the  annuity 
and  which  discounting  the  lapses,  will  range 
from  1.65%  salary  in  case  of  the  laborers  to 
5.03%  in  case  of  the  firemen.  It  will  also  pay  an 
accumulated  liability  contribution  (for  prior 
service)  about  twenty-five  years,  ranging  be- 
tween 3  2  and  6  per  cent  of  the  pajToU;  and 
it  will  pay  the  accidental  pensions  and  admin- 
istrative expenses. 

9.     Municipalities  and  Counties  of  New  York 
State. 

A  bill  passed  by  the  New  York  Legislature  of 
1922  (Draper's  A.  1912)  and  likely  to  become  a 
law,  provides  a  unified  state  system  for  the 
retirement  of  county  and  municipal  employees 
other  than  those  of  New  York  City  and  those 
already  covered  by  local  pension  funds.  Under 
this  act  the  employees  of  any  county  or  munici- 
pality whose  legislative  body  accepts  the  act, 
who  are  not  covered  by  any  existing  pension 
fund,  become  subject  to  the  provisions  of  the 
state  employees'  retirement  system. 

Membership  is  optional  for  all  present  em- 
ployees and  compulsory  for  all  new  entrants. 
The  system  would  operate  with  respect  to  mu- 
nicipalities and  counties  in  a  way  similar  to  that 
in  which  the  state  teachers  retirement  system 
operates  in  relation  to  the  local  school  systems. 
Each  municipality  or  county  participating  in  the 
fund  would  transmit  to  it  its  contribution  (the 
amount  of  which  will  be  determined  by  actuaries 
on  a  prorata  basis)  as  between  the  various  local 
units  and  the  contributions  of  its  employees  and 
when  its  employees  retire  their  retirement  allow- 
ances will  be  paid  from  this  fund.  The  benefits 
and  other  provisions  for  these  employees  will  be 
the  same  as  those  which  obtain  for  state  employ- 
ees. The  act  fiu"thermore  forbids  in  a  sweeping 
way  the  establishment  of  any  further  county  or 
municipal  pension  systems. 

If  this  act  becomes  a  law,  it  will  be  the  most 
far  reaching  undertaking  ever  made  in  the  his- 
tory of  pension  legislation  in  this  country  and 
one  worthy  of  serious  study  in  every  state  con- 
cerned with  the  problem  of  municipal  pensions, 


for  it  affords  the  most  radical  solution  of  this 
problem. 

10.    Providence. 

After  a  comprehensive  study  extending  over  a 
period  of  about  two  years,  the  Pension  Commit- 
tee of  Providence  prepared  a  bill  and  introduced 
in  the  Legislature  in  1922  providing  for  the  estab- 
lishment of  a  retirement  system  covering  all  the 
employees  of  the  city.  The  bill  is  favored  by  all 
concerned  except  by  the  policemen  and  firemen. 
If  it  is  defeated  this  year,  it  will  come  for  passage 
next  year.  Under  the  provisions  of  this  bill  re- 
tirement is  to  be  granted  for  policemen  and  fire- 
men at  the  age  of  58  and  for  other  employees  at 
the  age  of  sixty.  The  retirement  from  the  city 
is  to  equal  approximately  11%  of  the  average 
salary  of  last  10  years  multiplied  by  the  number 
of  years  of  service  with  the  exception  that  only 
one  half  of  the  prior  service  is  to  be  taken  into 
account.  The  pension  part  of  the  allowance  is 
fixed  at  f  of  1%  of  the  salary  for  each  year  of 
creditable  service.  In  case  of  disability  after  10 
years  of  service,  a  retirement  allowance  is  granted 
at  the  rate  of  j^  of  the  superannuation  rate  with 
a  provision  that  where  the  service  is  less  than 
fifteen  years  long  at  least  15  fractions  at  that 
rate  will  be  granted,  or  the  allowance  will  be 
brought  to  the  regular  retirement  age.  Disabil- 
ity caused  in  performance  of  duty  is  compensated 
by  a  pension  of  f  of  the  wage  plus  the  annuity 
provided  by  the  employee's  own  contributions, 
while  death  in  performance  of  duty  is  compen- 
sated by  a  pension  of  half  pay  in  addition  to 
the  employee's  own  contributions  with  inter- 
est. At  resignation,  dismissal  or  ordinary 
death  the  contributions  of  the  employee  are 
refunded  with  interest.  Present  employees  who 
do  not  wish  to  be  members  may  file  a  state- 
ment and  be  freed  from  membership  in  the  sys- 
tem. All  new  entrants  and  those  present  em- 
ployees who  have  not  filed  this  statement 
automatically  become  members. 

The  contribution  of  the  employees  range  ac- 
cording to  entrance  age  (and  occupation)  be- 
tween about  3%  of  salary  and  about  6%.  The 
city  will  contribute  a  normal  contribution  of 
about  2.7%  of  the  pay  roll  and  a  deficiency  con- 
tribution to  liquidate  the  accrued  liabilities  of 
about  2.5%  of  the  pay  roll  annually  or  an  aggre- 
gate of  about  5 1  per  cent  subject  to  such  read- 
justment as  may  be  found  necessary  from  time 
to  time  after  actuarial  valuation. 


1922] 


PENSIONS  IN  PUBLIC  EMPLOYMENT 


123 


Appendix — ^Actuarial  Tables 


Year 

1.  . 
2.. 

3.  . 

4.  . 

5.  . 
6.. 
7.. 
8.. 
9.. 

10.. 
11.. 
12.. 
13 


25. 


TABLE   1.     COMPOUND   INTEREST 

The  amount  accumulated  by  a  deposit  of  $1.00  paid  at  the  beginning  of  each  year  at  4  %  interest 
after  a  certain  number  of  years. 

Year  ^  mount 

26                                     $46.0842 

27 48.9676 

28''                            51.9663 

29 55.0849 

30 58.3283 

31 61.7015 

32 65.2095 

33 68.8579 

34 72.6522 

35 76.5983 

36 80.7022 

37 84.9703 

38 89.4091 

39 94.0255 

40 98.8265 

41 103.8196 

42 109.0124 

43 114.4129 

44 120.0294 

45 125.8706 

46 131.9454 

47 138.2632 

48 144.8337 

49 151.6671 

50 '. ; 158.7738 


Amount 

$1.0400 

2.1216 

3.2465 

4.4163 

5.6330 

6.8983 

8.2142 

9.6828 

11.0061 

12.4864 

14.0258 

15.6258 

17.2919 

14 ;; 19.0236 


20.8245 
22.6975 
24.6454 
26.6712 
28.7781 


on 30.9692 

oV 33.2480 

22 35.6179 

5o 38.0826 

24 40.6459 


43.3117 


TABLE  2.     ANNUITY  VALUES  ON  THE  BASIS  OF  THE  NEW  YORK  CITY  EXPERIENCE 
(Price  of  an  annuity  of  $1.  at  various  ages  of  retirement)  


Age 

Policemen 

Firemen 

Clerks 

Laborers 

Mechanics 

Men 
Teachers 

Women 
Teachers 

55 

$9.99 
9.81 
9.62 
9.43 
9.22 
9.01 
8.79 
8.55 
8.31 
8.06 
7.80 
7.52 
7.24 
6.95 
6.66 
6.36 

$10.19 
9.92 
9.68 
9.44 
9.23 
9.02 
8.81 
8.61 
8.40 
8.19 
7.98 
7.75 
7.51 
7.27 
7.01 
6.74 

$11.91 

11.62 

11.31 

11.01 

10.70 

10.38 

10.07 

9.75 

9.44 

9.12 

8.80 

8.49 

8.17 

7.86 

7.55 

7.24 

$11.81 

11.48 

11.15 

10.82 

10.49 

10.15 

9.81 

9.47 

9.13 

8.79 

8.45 

8.12 

7.78 

7.45 

7.13 

6.81 

$11.88 

11.57 

11.25 

10.93 

10.61 

10.29 

9.97 

9.64 

9.32 

8.99 

8.67 

7.34 

8.02 

7.70 

7.38 

7.07 

$10.23 
10.05 
9.86 
9.66 
9.45 
9.23 
9.01 
8.77 
8.54 
8.29 
8.04 
7.79 
7.54 
7.28 
7.02 
6.76 

$12.83 

12.56 

12.28 

11.99 

11.70 

11.39 

11.08 

10.76 

10.43 

10.10 

9.76 

9.42 

9.08 

8.73 

8.39 

8.04 

56 

57      

58    

59 

60        

61    

62 

63 

64 

65    

66 

67 

68    

69 

70 

TABLE  3.     EXPECTATION  OF  LIFE  ON  THE  BASIS  OF  NEW  YORK  CITY   EXPERIENCE 
(Number  of  Years  Employees  Retiring  at  a  Certain  Age  Would  on  the  Average  Live  Thereafter) 


Age 


55. 
56. 
57, 
58. 
59, 
60 
61, 
62 
63 
64 
65 
66 
67 
68 
69 
70 


Policemen 


14.24 

13.86 

13.47 

13.07 

12.67 

12.25 

11.83 

11.41 

10.97 

10.53 

10.09 

9.64 

9.18 

8.73 

8.28 

7.83 


Firemen 


14.60 

14.09 

13.61 

13.16 

12.74 

12.33 

11.94 

11.56 

11.17 

10.79 

10.40 

10.00 

9.60 

9.19 

8.77 

8.35 


Clerks 


17.79 
17.14 
16.50 
15.88 
15.26 
14.65 
14.05 
13.46 
12.88 
12.31 
11.76 
11.22 
10.69 
10.17 
9.67 
9.18 


Laborers 


17.40 
16.72 
16.05 
15.39 
14.74 
14.10 
13.47 
12.86 
12.26 
11.67 
11.10 
10.54 
10.00 
9.47 
8.97 
8.48 


Mechanics 


17.64 
16.98 
16.33 
15.68 
15.05 
15.43 
13.82 
13.22 
12.63 
12.06 
11.50 
10.95 
10.42 
9.90 
9.39 
8.90 


Men 
Teachers 


14.76 

14.37 

13.96 

13.55 

13.13 

12.70 

12.28 

11.84 

11.41 

10.98 

10.55 

10.12 

9.70 

9.28 

8.86 

8.45 


Women 
Teachers 


19.78 
19.13 
18.49 
17.84 
17.20 
16.55 
15.91 
15.27 
14.64 
14.01 
13.38 
12.77 
12.16 
11.57 
10.99 
10.43 


124 


NATIONAL  MUNICIPAL  REVIEW 


[April 


TABLE  4.    EXPECTATION  OF  LIFE  AND  ANNUITY  VALUES  ON  THE  BASIS  OF  THE  AMERICAN 

EXPERIENCE   MORTALITY  TABLE 
(For  Men  and  Women  Alike) 


Age 

Expectation  of  Ldfe 

Annuity  Values 

55        .  .             

17.40 
16.72 
16.05 
15.39 
14.74 
14.10 
13.47 
12.86 
12.26 
11.67 
11.10 
10.54 
10.00 
9.47 
8.97 
8.48 

56      

::::: 

57 

58      

59    

60 

S10.66 

61    

10.29 

62 

9.93 

63 

9.57 

64 

9.20 

65 

8.84 

66    

8.49 

67 

8.14 

68      

7.79 

69 

7.44 

70 

7.10 

BRIEF  BIBLIOGRAPHY  ON  PENSIONS 


1.  Brown,  Herbert  D. — 

Retirement  of  Employees  in  the  Classified 
Civil  Service  and  series  of  reports  on  the 
British  pension  systems — can  be  secured 
from  the  Government  Printer,  Washington, 
D.  C. 

2.  Buck,  George  B. — 

Actuarial  Report  on  the  Mortality  experi- 
ence among  the  New  York  City  employees 
(part  2.  Report  of  New  York  City  Com- 
mission on  Pensions)  also  series  of  actuarial 
reports  prepared  for  various  state  and  city 
systems  on  various  states  (can  be  obtained 
by  writing  to  George  B.  Buck,  25  Frankfort 
St.,  New  York  City) 

3.  Carnegie  Foundation  for  the  Advancement  of 

Teaching. — 

Annual  reports  (can  be  obtained  by  writing 
to  the  Foimdation.  576  Fifth  Ave.,  New 
York  City) 

4.  Meriam,  Lewis: — 

Principles  Governing  the  Retirement  of 
Public  Employees,  D.  Appleton  &  Co. 

5.  Studensky,  Paul: — 

Teachers  Pension  Systems  in  the  United 
States,  D.  Appleton  &  Co.,  The  Pension 


Problem  and  the  Philosophy  of  Contribu- 
tions (obtainable  from  the  New  York 
Bureau  of  Municipal  Research,  N.  Y.  C.) 
and  other  reports  and  bulletins  (can  be  se- 
cured by  writing  to  the  New  Jersey  State 
Chamber  of  Commerce,  Clinton  Building, 
Newark,  N.  J.) 
6.  Reports  of  various  official  commissions  and 
research  organizations: 
Massachusetts  Pension  Commission  (1914 
Public  Documents) ;  New  York  City  Com- 
mission on  Pensions  1913-19  (write  to  Sec- 
retary Board  of  Estimate) ;  New  York  Bu- 
reau of  Municipal  Research,  1913  (261 
Broadway) ;  New  York  State  Pension  Com- 
mission (State  Employees  Retirement  Sys- 
tem Albany,  New  York) ;  Milwaukee,  Chi- 
cago and  San  Francisco  commissions  (write 
to  Mayor  or  to  Employees  Retirement  Sys- 
tem) ;  New  Jersey  Pension  Commission  and 
New  Jersey  Bureau  of  State  Research  (New 
Jersey  State  Chamber  of  Commerce,  New- 
ark, N.  J.);  Boston  Finance  Commission; 
Providence  Pension  Committee;  actuarial 
Board  of  Federal  Employees  Retirement 
System  (Pension  Bureau,  Washington, 
D.  C.) 


GRIFFENHAGEN  &  ASSOCIATES,  Ltd. 

Engineers,  Accountants,  and  Specialists  in  Problems  of  Management. 
Services  available  to  public  officials  who  desire  to  apply  to  the  public 
service   the   best   methods   of   modern   progressive    business   concerns. 

HEADQUARTERS  OFFICES  AT  116  SOUTH  MICHIGAN  AVE.,  CHICAGO 


CHAS.  BROSSMAN 

Mem.  Atn.Soc.  C.E.  Mem.  Am.  Soc.  M.E. 

Consulting  Engineer 

Water  Works  and  Electric  Light  Plants 
Sewerage  and  Sewage  Disposal 

Merchants  Bank,  Indianapolis,  Ind. 


GOVERNMENTAL  SURVEYS  IfElZ'^.' 

tion— Methods — 4 dminiBtratlon— Salary  Standardization 
— Budget  Making — Taxation — Revenues— Expenditures- 
Civil  Service— Accounting — Public  Works 

J.  L.  JACOBS  &  COMPANY 

Municipal  Consultants  and  Engineers 
Monadnock  Building,  Chicago 

(Over  11  yrs.'  experience  in  City,  County  and  State  Stvdien) 


PROPORTIONAL  REPRESENTATION 

Best  Basis  for  the  City  Manager  Plan 

Send  25c  for  Lf t.  No.  1 0  (How  P.  R.  Worlci  in  Sacramento) 
and  new  Lit.  No.  5  (Ejcplanation  of  Hare  System  of  P.  R.) 

Still  better,  join  the  League.     Dues,  $2.  pay  for  quarterly 
Review  and  all  other  literature  for  year. 

PROPORTIONAL  REPRESENTATION  LEAGUE 
1417  LOCUST  STREET,  PHILADELPHIA 


R.  HUSSELMAN 

Mem.  Am.  Soc.  C.  E.  —         Am.  Assn.  Engrs. 

CONSULTING  ENGINEER 

Design  and  Construction  of  Electric,  Water  Works 

and  Filtration  Plants.      Public  Utility  Rate 

Investigations  and  Appraisals. 

CUYAHOGA  BLDG.  CLEVELAND,  OHIO 


SPEAKERS 

The  National  Municipal  League  maintains  a  list  of  persons  in  various 

parts  of  the  country  prepared  to  make  addresses  on 

city,  county  and  state  government. 

Augustus  R.  Hatton,  Ph.D.,  charter  consultant  for  the 
National  Municipal  League,  is  prepared  to  speak  on  the 
subjects  listed  below.  Dr.  Hatton  is  a  fluent  and  brilliant 
speaker  and  campaigner.  He  is  obtainable  on  a  fee  basis 
subject  to  prior  engagement.  (Address  National  Municipal 
League,  261  Broadway,  New  York.) 

SUBJECTS 

1.  Representative  Government.    What  is  it?    Do  we  want  it?    Can  we  have  it? 

2.  The  Coming  of  Mimicipal  Democracy.  A  discussion  of  the  evolution  of  types  of 
city  government  with  a  frank  evaluation  of  the  strength  and  weaknesses  of  each. 

3.  The  Problem  of  the  Ballot.  The  evolution  of  the  forms  of  voting  and  electoral 
processes  with  their  effects  on  popular  government. 

4.  American  Free  Cities.  The  experience  of  American  cities  with  constitutional 
home  rule. 

5.  Is  Manager  Government  Applicable  to  Our  Largest  Cities?  Conducted  as  a 
debate  if  desired.  Dr.  Hatton  taking  the  affirmative. 

6.  Getting  Residts  for  the  People's  Money.  Does  it  matter?  How  can  it  be  brought 
about? 

7.  What  Is  Wrong  with  State  Governments?  An  analysis  of  the  problems  of  state 
organization  and  administration  with  some  suggested  remedies  for  defects  everywhere 
admitted. 


cu 

N/ 


AN     INITIAL     FINE     OF     25     CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $I.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


APR    1     1933 
t    ,  APR     3    15-3 

Pock 


A  M 
Ted 


TU 


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JAN  20  1965 


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A  New  ivaunicipai 
$2.60. 


Govem- 


Experts     in     City 
ment.    $2.60. 

Municipal  Hianctions.    $2.60. 

Town  Planning.     $2.85. 

City  Planning.     $2.60. 

Satellite  Cities.     $2.60. 

The  Social  Center.     $2.60. 

The  City  Manager.     $2.60. 


OF  THE 
fAGUE 

50  cents 
00  per  hundred 
iinty  Govern- 


id  Elections. 
I  Enterprises. 

25  cents 
.00  per  hundred 

ttandardiza- 
jlic  Service. 

al  Primary. 

J  City  Plan. 

Reorganiza- 

st    for   Street 


tning. 
lustrated.) 


25  cents 
25  cents 
25  cents 


t)ks 
ent  by   Com- 
mission.    $3.10. 

10.  Excess    Condemnation. 
$2.60. 

11.  The   Regulation   of  Mimici- 
pal  Utilities.     $2.60. 

12.  The  Initiative,    Referendum 
and  Recall.    $2.85. 

13.  Lower   Living   Costs    in 
Cities.     $2.60. 

14.  Woman's  Work  in  Munici- 
palities.    $2.60. 


NATIONAL  MUNICIPAL  REVIEW 

261  BROADWAY,  NEW  YORK 

Annual  Subscription $5.00 

Free  to  Members  of  National  Municipal  League 


W,-i^ 


483283 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


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